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$4.7 Billion NFL Verdict Tossed & Kids Online Safety Act · Bloomberg Law

0:03
Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
0:10
Speaker 1: In just five weeks, the NFL's biggest financial threat in
0:14
Speaker 1: years was erased in court, almost like magic Well Legal magic.
0:20
Speaker 1: On June twenty seventh, the jury sided with football fans
0:23
Speaker 1: and awarded four point seven billion dollars in damages to
0:27
Speaker 1: residential and commercial subscribers after it rule the NFL had
0:31
Speaker 1: violated anti trust laws in distributing out of market Sunday
0:36
Speaker 1: afternoon games on a premium subscription service. Because damages can
0:41
Speaker 1: be tripled under federal anti trust laws, the NFL could
0:45
Speaker 1: have been liable for more than fourteen billion dollars. But
0:48
Speaker 1: then a California judge tossed out the verdict after throwing
0:52
Speaker 1: out the testimony of two expert witnesses and concluding the
0:57
Speaker 1: jury improperly calculated damages. Joining me is Bloomberg Intelligence Senior
1:02
Speaker 1: litigation analyst Jenniferree. The jury found that the arrangement was
1:07
Speaker 1: anti competitive. Did the judge find anti competitive behavior?
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Speaker 2: So the judge didn't necessarily find anti competitive behavior. What
1:16
Speaker 2: he said was that it wasn't unreasonable based on the
1:19
Speaker 2: evidence presented at trial for the jury to reach that conclusion.
1:23
Speaker 2: So essentially he supported the jury reaching the conclusion that
1:27
Speaker 2: the agreements between the NFL teams and the NFL and
1:31
Speaker 2: possibly I'm not clear on this, but possibly also with
1:33
Speaker 2: direct TV were anti competitive restraints.
1:36
Speaker 1: Yes, and the league had argued, let's there was the
1:39
Speaker 1: jury made up methodology to calculate damages, and he went
1:43
Speaker 1: off on that, right. Tell us why he went off
1:46
Speaker 1: on that.
1:47
Speaker 2: I have to tell you it was really kind of
1:49
Speaker 2: a strange way for a jury to calculate damages. So
1:53
Speaker 2: what happens in trial is there are experts, and the
1:55
Speaker 2: experts are there to assist the jury to explain to
1:58
Speaker 2: them how damages came and be calculated, what they think
2:01
Speaker 2: the world would have looked like but for these restraints
2:04
Speaker 2: that were deemed to be anti competitive, and what the
2:07
Speaker 2: prices would have been. So what a jury is meant
2:10
Speaker 2: to do is say, okay, in that butt for world
2:13
Speaker 2: where we didn't have these restraints, what would people have paid?
2:16
Speaker 2: But what did they actually pay? And what's the difference?
2:18
Speaker 2: And the judge actually instructed them that way. You have
2:21
Speaker 2: to say how much were people overcharged because of this
2:24
Speaker 2: bad behavior? What they need to get back is what
2:26
Speaker 2: they overpaid essentially, but instead the jury just kind of
2:30
Speaker 2: projected all of that and they took the list price.
2:34
Speaker 2: This is Sunday Ticket is what we're talking about, right,
2:36
Speaker 2: It's something you can buy from the NFL to get
2:38
Speaker 2: out of market games. And that's what the issue is here.
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Speaker 2: What did people and commercial entities pay for Sunday Ticket.
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Speaker 2: They took the list price for Sunday Ticket, and then
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Speaker 2: they took the testimony about what the actual average price
2:50
Speaker 2: paid for Sunday Ticket was. Because you know, people get coupons,
2:53
Speaker 2: they get discounts, they get specials, whatever, so there was,
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Speaker 2: you know, a little more than I think one hundred
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Speaker 2: dollars difference between the list price and the average price
3:00
Speaker 2: actually paid. They took that difference, so in other words,
3:03
Speaker 2: they took what was the discount and then they multiplied
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Speaker 2: that by the number of subscribers. So that really doesn't
3:09
Speaker 2: bear any relation to what the experts testified as to
3:13
Speaker 2: the overcharges. So the judge said, look, you can do
3:17
Speaker 2: the math. You can see how they calculated this. It's
3:20
Speaker 2: to the penny and it doesn't make sense. So that's
3:23
Speaker 2: part of it.
3:23
Speaker 1: The jury calculation was wrong, according to the judge. He
3:27
Speaker 1: also struck two economic experts who had testified for the subscribers.
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Speaker 2: Right, so, you know, I just talked about the butt
3:35
Speaker 2: four world. So one of those experts described what the
3:38
Speaker 2: butt four world might have looked like if they hadn't
3:41
Speaker 2: had the restraints, and the other one sort of talked
3:43
Speaker 2: about then what people would have paid, how things would
3:45
Speaker 2: have been, and what would have been paid to be
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Speaker 2: a subscriber to these out of market telecasts of NFL games.
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Speaker 2: And you know, an expert's conclusions and testimony really have
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Speaker 2: to be based on some sort of a methodology and
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Speaker 2: economic method methodology that makes sense. And here he basically
4:03
Speaker 2: said it really wasn't. It wasn't reliable. Neither expert were
4:07
Speaker 2: reliable one because really their testimony wasn't based both of
4:12
Speaker 2: them on a methodology that made sense. In one case,
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Speaker 2: the first expert basically said, Hey, if you didn't have
4:18
Speaker 2: these restraints, it would be just like college football. We
4:21
Speaker 2: have a bunch of college football games all over the
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Speaker 2: place on some cable channels, on some over the air channels,
4:26
Speaker 2: like you know, ABC on cable channels, and you see,
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Speaker 2: you know, loads of games every weekend, and this would
4:31
Speaker 2: be just like that. But he didn't really explain how
4:35
Speaker 2: it would. NFL has differences. It's different from college football.
4:38
Speaker 2: It isn't the same. And CBS and Box have some
4:40
Speaker 2: contracts with the NFL which aren't necessarily illegal, and those
4:44
Speaker 2: probably would have stayed in place. And what he didn't
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Speaker 2: do is say how this would have happened. And when
4:49
Speaker 2: asked how would this have all worked out, he said,
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Speaker 2: these are sophisticated entities. They would have made it work.
4:54
Speaker 2: That isn't good enough. You know, it needs to be
4:57
Speaker 2: based on some economic analysis that explaining exactly how everything
5:02
Speaker 2: would have panned out, what would have been shown, how
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Speaker 2: it would have been shown, how much it would have
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Speaker 2: been had the restraints not been in place. And so
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Speaker 2: the judge said, this is really just speculation that things
5:14
Speaker 2: would have been like college football, without explaining why or
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Speaker 2: how it would be like college football.
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Speaker 1: It's surprising to me that the plaintiffs, after all these
5:21
Speaker 1: years of litigation, didn't get an expert who could do that.
5:25
Speaker 1: It doesn't sound like it's something that's so impossible to
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Speaker 1: figure out.
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Speaker 2: I think they thought it would be sufficient because there
5:31
Speaker 2: was some effort by the defendants earlier in the litigation.
5:35
Speaker 2: It's called a dobear motion. To try to exclude the experts,
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Speaker 2: and they weren't able to do that. The judge said, no,
5:40
Speaker 2: I'm going to go ahead and let them testify. And
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Speaker 2: I think the plaintiffs thought that this testimony might be
5:45
Speaker 2: good enough. College football did face years ago a case
5:49
Speaker 2: that was similar to this one, and as a result
5:51
Speaker 2: of that litigation, we got what we got out of
5:54
Speaker 2: the NCAA. We got a lot of college games on
5:57
Speaker 2: a lot of different cable stations and over the air stations,
6:00
Speaker 2: and I think they thought it would be good enough
6:02
Speaker 2: to basically say, look, it's very similar and it would
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Speaker 2: be similar. But again from the perspective of what an
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Speaker 2: expert supposed to provide, the judge just deemed that to
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Speaker 2: be too speculative.
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Speaker 1: Was this a shocking decision to chass out the verdict.
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Speaker 2: I think not, because, first, all the way through trial,
6:18
Speaker 2: the judge seemed a really skeptical of plaintiff's evidence. He
6:21
Speaker 2: made comments like, I don't really think the evidence that
6:23
Speaker 2: you're presenting here supports your theory or supports your case.
6:26
Speaker 2: I don't really think you're making your case. So he
6:28
Speaker 2: was skeptical the whole way. So that's one thing, and
6:31
Speaker 2: the second thing is when you did look at the
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Speaker 2: damages that the jury awarded, they did look odd. They
6:36
Speaker 2: weren't the damages that the experts predicted would be the
6:39
Speaker 2: appropriate damages. And you saw that it was kind of
6:42
Speaker 2: clear the way they calculated them in a way that
6:44
Speaker 2: didn't make sense. Right, So I think that wasn't surprising.
6:48
Speaker 2: And then June also, this has a long history, right,
6:51
Speaker 2: This litigation has been going for ten years, and it
6:53
Speaker 2: already went before the Supreme Court at one point. I
6:56
Speaker 2: should say that the NFL tried to get Supreme Court
6:59
Speaker 2: review sume Court didn't pick up the case because it
7:01
Speaker 2: was just on emotion to dismiss and that's kind of
7:03
Speaker 2: early on in the matter and sort of procedural. But
7:07
Speaker 2: in saying we won't review the case, Justice Kavanaugh released
7:10
Speaker 2: a statement and in the statement he basically said he
7:13
Speaker 2: doesn't think that the plaintiff's case is good here that
7:16
Speaker 2: he agrees with the NFL's position, and they didn't take
7:19
Speaker 2: the case because it's just on emotion to dismiss.
7:21
Speaker 3: It's early on.
7:22
Speaker 2: But by the way, NFL, if you lose, practically invited
7:25
Speaker 2: them to come back to the Supreme Court.
7:27
Speaker 1: What surprised me here the jury didn't follow the judges
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Speaker 1: in struct rights. According to the judge, the jury calculated
7:34
Speaker 1: the damages wrong. So then you order a new trial
7:37
Speaker 1: and you give another jury a chance, especially after ten
7:40
Speaker 1: years of litigation.
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Speaker 2: So I think a new trial could be where we
7:44
Speaker 2: end up here. So the reason he did that is
7:46
Speaker 2: because there were sort of three issues.
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Speaker 1: Right.
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Speaker 2: He didn't just say that the jury's damages made no sense.
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Speaker 2: That was one thing. But he also discounted and discluded
7:55
Speaker 2: the evidence of two experts. And because he did that,
7:58
Speaker 2: he granted judgment notwithstand need the verdict, because without those
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Speaker 2: two experts testimony, there was no evidence presented at all
8:06
Speaker 2: to establish that there was injury or what the damages
8:09
Speaker 2: would have been for that injury.
8:10
Speaker 1: And because of that.
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Speaker 2: It was judgment notwithstanding the verdict. Now here's the thing,
8:15
Speaker 2: what happens now? I would think that the plaintiffs will
8:17
Speaker 2: probably appeal based on what we talked about right at
8:20
Speaker 2: the beginning of this segment, that the judge didn't find
8:23
Speaker 2: it unreasonable for the jury to decide that there'd been
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Speaker 2: anti competitive conduct. Right, So the judge agreed with that.
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Speaker 2: So on that basis, consumers and commercial entities, they're do
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Speaker 2: something right. There was anti competitive conduct according to this jury.
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Speaker 2: I would think the plaintiffs would appeal, and I would
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Speaker 2: believe that the upshot of that appeal, if they're successful,
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Speaker 2: would be to send it back for a new trial
8:44
Speaker 2: on damages.
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Speaker 1: This has been going on so long that in twenty
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Speaker 1: seventeen a judge dismissed the lawsuit right at that point,
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Speaker 1: too right, right, and the Ninth Circuit two years later reversed.
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Speaker 2: That was really early on, so that was the motion
8:58
Speaker 2: to dismiss. So it was first dismissed, went to the
9:01
Speaker 2: Ninth Circuit. The Ninth Circuit resurrected it, and that's when
9:04
Speaker 2: the NFL tried to get before the Supreme Court. It
9:06
Speaker 2: was on that Ninth Circuit's decision to send it back
9:09
Speaker 2: to the trial court on remand well it was a reversal, so,
9:13
Speaker 2: you know, no motion to dismiss, keep litigating, and that's
9:16
Speaker 2: when the Supreme Court refused to take the case. And
9:18
Speaker 2: then we went through the litigation and the trial. So
9:21
Speaker 2: that was really very different, a different situation. There was
9:24
Speaker 2: no evidence presented at that time.
9:26
Speaker 1: Looking at this big picture, it seems hard to believe
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Speaker 1: that there wasn't some anti competitive conduct here.
9:32
Speaker 2: Well, you know, it's really complicated June, because there is
9:35
Speaker 2: something called the Sports Broadcasting Act. It's from the nineteen sixties,
9:38
Speaker 2: and what it does is it exempts professional football from
9:43
Speaker 2: antitrust laws, the conspiracy laws for the purpose of being
9:48
Speaker 2: organizing a league, right and for the purpose of having
9:51
Speaker 2: all these teams that must come together to present professional football,
9:54
Speaker 2: the games, the Super Bowl, et cetera. And what it
9:58
Speaker 2: did at the time is it exempts it for the
10:00
Speaker 2: purposes of pooling their licensing for free TV. But there
10:05
Speaker 2: was nothing but free TV then. There was no cable.
10:07
Speaker 3: It was just.
10:08
Speaker 2: Ad supported television is what we got, right, and we
10:11
Speaker 2: didn't pay for it. Things are different today. So one
10:14
Speaker 2: of the arguments here by the NFL was that, well,
10:16
Speaker 2: we're exempt from the antitrust laws because of the Sports
10:18
Speaker 2: Broadcasting Act. We can do this. We can go ahead
10:21
Speaker 2: and license pull the rights to the telecasts of all
10:24
Speaker 2: the games and then sell them as a package to
10:26
Speaker 2: Direct TV and let Direct TV charge subscribers whatever they
10:29
Speaker 2: want to, right, Because this was the issue. So the
10:32
Speaker 2: question is does the Sports Broadcasting Act apply or not?
10:35
Speaker 2: And I think that if the NFL was planning ahead
10:39
Speaker 2: and looking at their conduct. Their position would have been, well,
10:41
Speaker 2: we're exempt, so we can do this.
10:43
Speaker 1: I was surprised that we haven't heard from the plaintiffs
10:46
Speaker 1: immediately saying we're going to appeal this, which they've done before.
10:51
Speaker 1: So what do you think is next?
10:52
Speaker 2: You know, I think it's such an interesting situation because
10:56
Speaker 2: I would think the plaintiffs would want to appeal just
10:58
Speaker 2: because they did get the jury verdict that there was
11:00
Speaker 2: anti competitive conduct. But on the other hand, this litigation
11:03
Speaker 2: has been going for ten years now. If they appeal,
11:06
Speaker 2: we're tacking on years and years and years because the
11:08
Speaker 2: Ninth Circuit is pretty backed up. They've got a lot
11:11
Speaker 2: of cases. They're taking a long time to decide on
11:13
Speaker 2: these appellate matters you're looking at. It could be another
11:16
Speaker 2: two years before they get that decision. It's been ten years.
11:20
Speaker 2: And if the decision is to send it back to
11:21
Speaker 2: a new trial, I mean, I think at this point
11:24
Speaker 2: they may just want to get paid. So what I
11:26
Speaker 2: think this could lead to is some sort of a
11:29
Speaker 2: settlement here.
11:30
Speaker 1: Not much of a settlement though.
11:31
Speaker 2: I don't think so. I mean, you know, that's the
11:33
Speaker 2: thing their issues here on both sides. The NFL probably
11:36
Speaker 2: feels like they have a strong case. But on the
11:39
Speaker 2: other hand, everybody's probably tired of this litigation and it
11:42
Speaker 2: may be worth their while just to pay these plaintiffs
11:44
Speaker 2: and make it all go away, because the litigation itself
11:47
Speaker 2: is costing them a lot of money and as I said,
11:49
Speaker 2: could drag on for years. So we'll have to see
11:51
Speaker 2: what happens. I suspect at least there will be an
11:53
Speaker 2: appeal and it might get to the Ninth Circuit.
11:55
Speaker 1: Turning to another antitrust issue, another deal that the ft
12:00
Speaker 1: SEE is opposing the Krug or Albertson's merger. So Jen
12:04
Speaker 1: there are going to be some important proceedings in the
12:07
Speaker 1: case this month tells about that.
12:09
Speaker 2: In Portland, Oregon. The trial or the hearing they call
12:13
Speaker 2: it a hearing. I sort of call it a trial
12:14
Speaker 2: because it really is a mini trial on the FTC's
12:17
Speaker 2: motion for a preliminary junction that starts in Portland, Oregon
12:20
Speaker 2: on the twenty sixth of.
12:21
Speaker 1: August, and just tell us what the FTC's case is
12:24
Speaker 1: about briefly.
12:25
Speaker 2: So really, you know, this is a straightforward horizontal deal, right,
12:30
Speaker 2: So the FTC's just looking at two competitors. They're both
12:32
Speaker 2: grocery stores, they look at these in separate local regions. Obviously,
12:36
Speaker 2: that makes sense because grocery stores compete with each other
12:39
Speaker 2: in localities, they don't compete in a nationwide basis. So
12:43
Speaker 2: I call this a map merger, right, because you dot
12:45
Speaker 2: out where all these grocery stores are on a map,
12:47
Speaker 2: and you make circles around the ones that are close
12:49
Speaker 2: to each other, and then you look at who else
12:51
Speaker 2: is in there competing, and it means any number of
12:55
Speaker 2: locations could be problematic from an antitrust perspective, because it
12:58
Speaker 2: could be a merger to monopoly. It could be a
13:01
Speaker 2: merger three to two, four to three, leaving not enough
13:04
Speaker 2: grocery options in those local regions. So what the FTC
13:07
Speaker 2: has said is, look, that is the problem here. Now
13:10
Speaker 2: they've led to some other allegations, but really the primary
13:13
Speaker 2: issue here is horizontal competition and areas where it's overly concentrated,
13:18
Speaker 2: and the concentration numbers give the FDC a presumption of
13:22
Speaker 2: harm from this deal.
13:24
Speaker 1: Did the companies try any remedies?
13:26
Speaker 2: The companies did do what is typical. They offered to
13:28
Speaker 2: divest some of these stores, actually quite a lot, I
13:31
Speaker 2: think almost six hundred at this point. They keep upping
13:34
Speaker 2: the number. So I don't know Jack will exactly know
13:36
Speaker 2: where they landed now, but they keep adding to it,
13:38
Speaker 2: and they've offered to divest quite a few stores to
13:41
Speaker 2: a company called CNS Wholesale, which is a very big company,
13:45
Speaker 2: but it's really mostly a wholesaler. It's not really a
13:48
Speaker 2: retail grocer. It does have some retail grocery stores, it
13:52
Speaker 2: does operate some, but it actually franchises more than it operates.
13:56
Speaker 2: And the FTC rejected the settlement. They said it was
13:58
Speaker 2: two piecemeal. There weren't enough sort of ancillary support assets
14:02
Speaker 2: to help, like distribution centers, and they don't like the
14:05
Speaker 2: buyer because the buyer doesn't really have a good history
14:08
Speaker 2: of operating grocery stores. And unfortunately for Albertson's and Kroger,
14:14
Speaker 2: there is a history of some failed divestiture remedies in
14:18
Speaker 2: the grocery world. So the FTC said, no, settlements, not
14:21
Speaker 2: good enough. We're still going to sue you. So I
14:24
Speaker 2: think the issue will be one proving that the deal's
14:27
Speaker 2: anti competitive, and then two, you know, the companies will
14:31
Speaker 2: try to convince a judge that their remedy is good enough.
14:33
Speaker 1: Thanks so much, Jen, As always that's Bloomberg Intelligence senior
14:37
Speaker 1: litigation analyst Jenniferree. For more of Jen's analysis, you can
14:41
Speaker 1: go to bigo on the Bloomberg terminal. There were some
14:44
Speaker 1: dramatic moments in January when the Senate Judiciary Committee heard
14:49
Speaker 1: from the CEOs of five major social media companies about
14:52
Speaker 1: what could be done to protect kids online. Republican Senator
14:57
Speaker 1: Josh Hawley asked Meta CEO Mark Zuckerber to apologize to
15:01
Speaker 1: the family members of kids who've been directly affected by
15:05
Speaker 1: online child exploitation.
15:07
Speaker 3: Would you like now to apologize to the victims who
15:10
Speaker 3: have been harmed by product showing them the pictures? Would
15:13
Speaker 3: you like to apologize for what you've done to these
15:16
Speaker 3: good people?
15:16
Speaker 1: Zuckerberg pushed back on studies that suggested that social media
15:21
Speaker 1: use was a deterrent to teen's mental health.
15:24
Speaker 3: Mental health is a complex issue, and the existing body
15:27
Speaker 3: of scientific work has not shown a cause a link
15:30
Speaker 3: between using social media and young people having worse mental
15:33
Speaker 3: health outcomes.
15:35
Speaker 1: Congress has been under immense public pressure to address criticisms
15:39
Speaker 1: that social media companies are harming kids and their mental
15:43
Speaker 1: health with addictive algorithms and toxic content. So in a
15:48
Speaker 1: rare display of bipartisanship. The Senate overwhelmingly passed legislation last
15:53
Speaker 1: week that's designed to protect children from dangerous online content.
15:59
Speaker 1: Only three Secs voted against the act. The Kids Online
16:03
Speaker 1: Safety Act would require social media companies to make their
16:07
Speaker 1: platform safer for kids, but critics of the bill say
16:11
Speaker 1: it would violate the First Amendment and harm vulnerable kids
16:15
Speaker 1: who wouldn't be able to access information on things like
16:18
Speaker 1: LGBTQ issues or reproductive rights. The bill's fate in the
16:23
Speaker 1: House is uncertain. Joining me is Eric Goleman, a professor
16:27
Speaker 1: at the Santa Clara University School of Law and co
16:30
Speaker 1: director of the High Tech Law Institute. Eric explained COOSA
16:34
Speaker 1: and what it would do.
16:36
Speaker 4: It's impossible to summarize COSA because there has so many
16:39
Speaker 4: moving parts. The main centerpiece of the law is what's
16:43
Speaker 4: called a duty of care that services governed by the
16:47
Speaker 4: law are required to treat kids specially and stay like that.
16:51
Speaker 4: We might think that's a pretty good idea, but the
16:53
Speaker 4: devil is in the details. The law then has a
16:55
Speaker 4: bunch of other provisions that has to build in certain
16:58
Speaker 4: safeguards for children. It requires parental authorization before children can
17:03
Speaker 4: get onto certain websites, and it requires this weird thing
17:06
Speaker 4: called a filter bubble Transparency Report, which is basically, I think,
17:12
Speaker 4: trying to make people understand the algorithms better and a
17:16
Speaker 4: whole bunch more. It's kind of one of those things
17:18
Speaker 4: where I was trying to think about how to describe it.
17:21
Speaker 4: It's like kneeling jello to the wall. There's so much
17:23
Speaker 4: going on there it's impossible to pinpoint exactly what this
17:27
Speaker 4: law does.
17:27
Speaker 1: Congress has been under intense public pressure to address the
17:34
Speaker 1: criticisms that social media companies are hurting kids and their
17:38
Speaker 1: mental health with these addictive algorithms and toxic content. Will
17:42
Speaker 1: it help that?
17:43
Speaker 4: So there's a fundamental, baseline factual question that this law
17:47
Speaker 4: doesn't engage with, and that's whether not social media is
17:51
Speaker 4: in that positive or negative for children. And the empirical evidence,
17:57
Speaker 4: which is coming out fast and furious, suggests that there
18:00
Speaker 4: are many ways in which social media is a net
18:02
Speaker 4: benefit for children, and this law would actually work against that.
18:07
Speaker 4: It would try to take those benefits away from children.
18:10
Speaker 4: So if we assume that social media is only pernicious
18:14
Speaker 4: towards children and only hurts them, this law might be
18:18
Speaker 4: an approach I don't think it's a good one, but
18:20
Speaker 4: it is an approach. But if we disagree on that
18:23
Speaker 4: factual premise, this law is actually really dangerous. This law
18:26
Speaker 4: will hurt many more kids than it's likely to help.
18:30
Speaker 1: Some groups say that kids won't have access to information
18:36
Speaker 1: about abortion and gender identity, transgender health care. Is that
18:41
Speaker 1: what you're referring to?
18:42
Speaker 4: Those are definitely on my mind, But I think it's
18:44
Speaker 4: broader than that, And the data is showing across a
18:47
Speaker 4: lot of different studies that children are looking for places
18:51
Speaker 4: to connect with others, especially in the pandemic era, when
18:54
Speaker 4: they were literally physically prevented from engaging with their peers
18:59
Speaker 4: in person. The Internet became what's called the third place.
19:03
Speaker 4: It's not school, and it's not home. It's a third
19:07
Speaker 4: place that people can connect. And it's that social connection,
19:10
Speaker 4: whether it's on a specific topic like LGBTQ identity, or
19:16
Speaker 4: it's a more general issue about just wanting to make friends.
19:20
Speaker 4: Social media and other Internet services have provided outlets for
19:24
Speaker 4: that desire, that very basic human need, and if you
19:28
Speaker 4: take that away, it's possible and in fact probable, that
19:31
Speaker 4: it can't be repicated in the offline world, that it
19:34
Speaker 4: just won't exist for those children more, the connections that
19:37
Speaker 4: they had will no longer exist. They won't have an
19:39
Speaker 4: outlet to find new connections, and that just makes them
19:42
Speaker 4: lonelier and sadder.
19:44
Speaker 1: How do you balance that, though, with the number of
19:46
Speaker 1: deaths from social media.
19:49
Speaker 4: I mean, that's a tough question because it again assumes
19:52
Speaker 4: that social media caused the death. And I'm not there
19:56
Speaker 4: close enough to the family to know, But we do
19:59
Speaker 4: know that teens, especially are under extraordinary mental distress for
20:04
Speaker 4: reasons have nothing to do with social media. They are
20:07
Speaker 4: concerned about things like the pandemic and climate change and
20:11
Speaker 4: the fact that we have efforts to impose an authoritarian
20:14
Speaker 4: government that isn't listening to the needs of children, and
20:18
Speaker 4: so like, there's so much going on in society that's
20:21
Speaker 4: distressing kids, and to pull out one factor and assume
20:24
Speaker 4: that that's the cause really is actually, I think not
20:28
Speaker 4: properly respecting all the other problems we have that might
20:32
Speaker 4: also be needing to be addressed. So my heart goes
20:36
Speaker 4: out to the families who've lost children, either by death
20:39
Speaker 4: or just through mental distress due to the internet. But
20:43
Speaker 4: there are a lot of other things going on, and
20:45
Speaker 4: we have to be very, very careful about making sure
20:48
Speaker 4: that we're precisely identifying the root problems and then addressing those.
20:53
Speaker 1: Do you think that there are First Amendment problems here?
20:56
Speaker 4: They're enormous First Amendment problems. And what's so bad to
21:00
Speaker 4: me is that Congress ninety one out of one hundred
21:03
Speaker 4: centers voted for a law that seems like it goes
21:06
Speaker 4: straight into the teeth of an opinion that just came
21:09
Speaker 4: out a month ago saying that you cannot do many
21:12
Speaker 4: of the things that are being required this law, and
21:15
Speaker 4: the drafters didn't make any effort to accommodate the new
21:18
Speaker 4: information that came out from the Supreme Court that said,
21:22
Speaker 4: here are the limits on your ability to control how
21:24
Speaker 4: people publish content and talk to each other online. And
21:28
Speaker 4: so they're just doubling down on rules that were drafted
21:31
Speaker 4: without the guidance the Supreme Court just gave them, And
21:34
Speaker 4: to me, that's baffling.
21:35
Speaker 1: Coming up next on the Bloomberg Law Show, I'll continue
21:37
Speaker 1: this conversation with Professor Eric Goleman of Santa Clara University
21:41
Speaker 1: Law School. We'll talk about how COOSO would be enforced. Also,
21:45
Speaker 1: Google loses a huge antitrust case.
21:48
Speaker 4: The iSER ninety one, the NASAR three and the motion
21:51
Speaker 4: is agreed to.
21:52
Speaker 1: The Senate resoundingly passed a package of internet safety bills
21:56
Speaker 1: last Tuesday. The Kids Online Safety Yet would require social
22:01
Speaker 1: media companies to make their platform safer for kids, but
22:05
Speaker 1: critics of the bill say it would violate the First
22:08
Speaker 1: Amendment and harm vulnerable kids who wouldn't be able to
22:11
Speaker 1: access information on things like LGBTQ issues or reproductive rights.
22:17
Speaker 1: President Joe Biden commended the Senate for taking what he
22:21
Speaker 1: called a crucial bipartisan step forward, but it's not clear
22:25
Speaker 1: if House Speaker Mike Johnson will bring up the package
22:28
Speaker 1: for a vote. I've been talking to Professor Eric Goldman
22:31
Speaker 1: of Santa Clara University Law School. The package also includes
22:35
Speaker 1: the Children and Teens Online Privacy Protection Act.
22:39
Speaker 4: Main thing that's at issue in both laws is how
22:43
Speaker 4: does the service know that they're dealing with a child.
22:46
Speaker 4: And in the old rules psy Congress back in the
22:49
Speaker 4: nineteen nineties, the services would be obligated to treat a
22:53
Speaker 4: user differently if they actually knew that the user was
22:58
Speaker 4: a child, or they had built a website that was
23:00
Speaker 4: during essentially only the children KOSA and the COPA two
23:04
Speaker 4: point zero revisions try to loosen that standard to make
23:08
Speaker 4: it so that there are times on which a service
23:10
Speaker 4: will know for legal purposes that they're dealing with a minor,
23:14
Speaker 4: even if they don't have quote actual knowledge from that
23:18
Speaker 4: user that they are a minor. And it's that intermediate
23:21
Speaker 4: gap that services will have to treat some users as
23:25
Speaker 4: minors without having received quote actual knowledge that actually puts
23:30
Speaker 4: services in an untenable position. They don't know when they're
23:33
Speaker 4: going to be dealing with a minor or not, and
23:35
Speaker 4: if they don't follow the rules for minors, then lots
23:37
Speaker 4: of bad things could happen them from a legal standpoint.
23:40
Speaker 4: And so this question of who is a minor and
23:43
Speaker 4: how does the service know is the essential one Internet law.
23:47
Speaker 4: It's as old as the Internet itself. This is the
23:50
Speaker 4: first question that the lawmakers try to address back in
23:53
Speaker 4: the nineteen nineties, and we still cannot resolve that fundamental
23:57
Speaker 4: question today. We simply don't have a good way of
24:00
Speaker 4: deciding when a user is a minor or not for
24:03
Speaker 4: legal purposes, and if we get it wrong, then services
24:07
Speaker 4: have to do things that we actually didn't intend them
24:09
Speaker 4: to do.
24:09
Speaker 1: The bill supporters say the measure would keep kids safe
24:13
Speaker 1: by requiring companies to control the design, not the content,
24:18
Speaker 1: of their platforms. I don't quite understand that, but do you.
24:22
Speaker 4: I don't, and let me explain why. So there's been
24:25
Speaker 4: a broad based regulatory effort to say that when we're
24:29
Speaker 4: dealing with online publication of content, we can make a
24:32
Speaker 4: distinction between the content that's being published and other publication
24:37
Speaker 4: decisions like how to present the content, who to present
24:41
Speaker 4: it to, and in my mind, they are all part
24:43
Speaker 4: of the same publication process. Deciding the way in which
24:47
Speaker 4: you present content is equally important to what the substance
24:50
Speaker 4: of the content says. So drawing that distinction is nonsensical,
24:55
Speaker 4: but it's something that lots of regulators are doing. It's
24:58
Speaker 4: something that courts are prepared to do, and as a result,
25:01
Speaker 4: it creates this weird artificial distinction between content and how
25:06
Speaker 4: you talk about your content or how you present your content.
25:09
Speaker 1: What other problems do you see with this bill?
25:12
Speaker 4: I think the core problem with a bill is that
25:15
Speaker 4: it creates a set of legal incentives that services simply
25:19
Speaker 4: can't manage. If they are dealing with users that they
25:23
Speaker 4: know are children, or the law deems them to have
25:26
Speaker 4: known they were children, then they have burdens that they
25:29
Speaker 4: simply can't comply with. I look at this law and
25:32
Speaker 4: I say, I don't want to have children on my
25:34
Speaker 4: site if I have to run through this gonglet. The
25:37
Speaker 4: risks are too great, the obligations are too onerous. It
25:40
Speaker 4: doesn't make sense for me. If I know that someone
25:43
Speaker 4: is a minor or, I think they're a minor. They're
25:45
Speaker 4: going to be kicked off our site. Now, that is
25:48
Speaker 4: a solution. If we want to shrink the Internet for
25:50
Speaker 4: children and make it so that they have less things
25:53
Speaker 4: that they can do online, that is a form of
25:56
Speaker 4: child protection. It is also a disadvantage for children because
25:59
Speaker 4: it means that they can't do the self expression that
26:02
Speaker 4: they need, the self identification, the exploration that we expect,
26:06
Speaker 4: especially from teenagers. They simply won't be able to do
26:08
Speaker 4: it in the way that we think they ought to
26:11
Speaker 4: be able to. So if the doors start closing the
26:14
Speaker 4: children online, I think in the end children get the
26:17
Speaker 4: worst deal of that. That actually is not good for children,
26:19
Speaker 4: it's not good for society. And this loss sets up
26:22
Speaker 4: those incentives to close doors to children online and simply
26:25
Speaker 4: say they're not welcome. And if that's really the case,
26:28
Speaker 4: I do question, you know what now will be the
26:31
Speaker 4: next set of problems our children face when the Internet
26:34
Speaker 4: doesn't work as they'd like.
26:35
Speaker 1: Is there anything that you like that you think is
26:38
Speaker 1: positive about.
26:39
Speaker 4: This bilm No, I really don't.
26:42
Speaker 1: You know.
26:43
Speaker 4: It's easy to be a cavecher and to just point
26:45
Speaker 4: out problems, but the loss starts with two fundamental problems
26:50
Speaker 4: that it cannot fix, and once it can't fix those problems,
26:54
Speaker 4: nothing good results. The first problem is determine when a
26:58
Speaker 4: user is a child or not. It's simply not possible
27:01
Speaker 4: for services to do without engaging in some very privacy
27:06
Speaker 4: and security and basive procedures. So any law that's predicated
27:09
Speaker 4: on the idea of segregating children from the rest of
27:12
Speaker 4: the population and then providing some kind of differential treatment
27:16
Speaker 4: is always going to be problematic. And then the second
27:19
Speaker 4: thing is that it fundamentally you served the editorial discretion
27:25
Speaker 4: of services and says we don't like how you're making
27:29
Speaker 4: your decisions how a publish content, We're going to tell
27:31
Speaker 4: you how to do it. And that fundamental editorial discretion
27:35
Speaker 4: is protected by the Constitution and essential to give services
27:39
Speaker 4: the ability to cater to their users. So this law
27:43
Speaker 4: starts with those two premises, that we can figure out
27:46
Speaker 4: who the kids are and we can tell services how
27:48
Speaker 4: to deal with them, and that simply does not work.
27:52
Speaker 4: So there's no way to fix that law. Yet, to
27:55
Speaker 4: start with the fundamental premise, i'll mention one other thing
27:57
Speaker 4: I did mention before that it starts with the premise
27:59
Speaker 4: that the regulated entities governed by the law are always
28:03
Speaker 4: harming children and that they always need to be fixed.
28:06
Speaker 4: And given how many different ways children are benefiting from
28:10
Speaker 4: their Internet experiences, the law doesn't even account for that,
28:13
Speaker 4: doesn't care about that. It's fine to sacrifice all the
28:16
Speaker 4: benefits that children came from the Internet in the effort
28:19
Speaker 4: to try and squeals some of the potential harms. And
28:21
Speaker 4: so it's just it doesn't even do the right cost
28:23
Speaker 4: benefit calculus.
28:24
Speaker 1: And how would this be enforced?
28:27
Speaker 4: So the law principally relies upon the Federal Trade Commission
28:30
Speaker 4: to do enforcement. It also gives some limited authority to
28:34
Speaker 4: the state attorneys general, but the law certainly contemplates that
28:38
Speaker 4: the FTC will be the primary enforcement mechanism, and the
28:42
Speaker 4: FTC is good at looking for things like false advertising
28:46
Speaker 4: when consumers are being hoodwinked into partying with their money
28:50
Speaker 4: to scammers. The FTC is not in the business so
28:53
Speaker 4: being basically a content censorship board, which is what this
28:57
Speaker 4: law would ask it to do. So it's deputiesing the
29:01
Speaker 4: FTC to do think that that is really not that
29:03
Speaker 4: good at and frankly, we don't really want them doing.
29:06
Speaker 1: President Biden commanded the Senate for taking what he called
29:10
Speaker 1: a crucial bypartisan step forward. Quote there is undeniable evidence
29:16
Speaker 1: that social media and other online platforms contribute to our
29:19
Speaker 1: youth mental health crisis.
29:22
Speaker 4: And the President said he would sign it. The only
29:24
Speaker 4: question is whether or not the Speaker of the House
29:26
Speaker 4: will schedule ABOUTE. It's the Speaker of the House will
29:29
Speaker 4: schedule ABOUTE. It almost only will pass. It will go
29:31
Speaker 4: to Biden and he'll sign it. So like everything depends
29:33
Speaker 4: on the Speaker of a house to decide if he
29:36
Speaker 4: wants to put it on the agenda. And you know,
29:39
Speaker 4: as an internet law expert who's been watching this space
29:42
Speaker 4: for thirty years, I can see the pathologies in the
29:45
Speaker 4: regulatory process that continually lead to terrible legislative outcomes. And
29:53
Speaker 4: then our only chance of preserving the Internet in any
29:56
Speaker 4: functional way is in the court. We have to take
29:59
Speaker 4: it to the court, and that's not a situation for
30:03
Speaker 4: long term success.
30:04
Speaker 1: Well, if this bill does pass the House, it certainly
30:07
Speaker 1: will end up in the courts, that's for sure. Thanks
30:10
Speaker 1: so much, Eric. That's Professor Eric Goldman of Santa Clara
30:13
Speaker 1: University Law School. In other legal news today, a huge
30:17
Speaker 1: loss for Google. A federal judge rule that Google has
30:21
Speaker 1: illegally monopolized the search market, handing the government and epic
30:26
Speaker 1: win in its first major antitrust case against a tech
30:29
Speaker 1: giant in more than two decades. DC Judge at Metas
30:33
Speaker 1: said that Google's twenty six billion dollars in payments to
30:37
Speaker 1: make its search engine the default option on smartphones and
30:41
Speaker 1: web browsers effectively blocked any other competitor from succeeding in
30:45
Speaker 1: the market end quote. The trial evidence firmly established that
30:49
Speaker 1: Google's monopoly power, maintained by the exclusive distribution agreements, has
30:55
Speaker 1: enabled Google to increase text ads prices without any meaningful
30:59
Speaker 1: competitive constraint. Google said it plans to appeal the decision.
31:04
Speaker 1: And that's it for this edition of the Bloomberg Law Podcast.
31:07
Speaker 1: Remember you can always get the latest legal news by
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Speaker 1: subscribing and listening to the show on Apple Podcasts, Spotify,
31:13
Speaker 1: and at Bloomberg dot com, slash podcast, slash Law. I'm
31:17
Speaker 1: June Grosso and this is Bloomberg