Weekend Law: DOE Dismantled, Afghan Reprieve & Mega Deals

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1:44This is Bloomberg Law with June Grosso from Bloomberg Radio. And it sounds strange, doesn't it? Department of Education, we're going to eliminate it, and everybody knows it's right. In March, President Trump signed an executive order to dissolve the Department of Education, which oversees billions of dollars in funding for everything from student loans to special needs and nutritional programs. Trump said that the essential services provided by the department will be picked up by other agencies. And guess who else? All we have to do is get the students to get guidance from the people that love them and cherish them, including their parents, by the way, who will be totally involved in their education along with the boards.

2:31Well, 20 Democratic state attorneys general sued, arguing that the administration's actions to dismantle the DOE are illegal and unconstitutional because only Congress has the authority to eliminate the department. Here's New Jersey Attorney General Matthew Platkin. They're hurting our kids to score cheap political points. And I think for the 85 percent of families in this country that rely on public education, this is an affront to all of us. A federal judge in Boston agreed and said that the Trump purge would leave the department unable to perform duties required by the law. He issued a preliminary injunction in May, blocking the administration from downsizing the department.

3:13But on Monday, a divided Supreme Court lifted that judge's order and allowed Trump to resume dismantling the DOE over a blistering dissent by the court's three liberals. Joining me is constitutional law expert David Super, a professor at Georgetown Law. Trump can't officially eliminate the Department of Education or any department, but can he effectively dismantle it? He has done so with the Department of Education. I don't think it's lawful. I don't even understand a plausible legal theory why it might be lawful, but he has certainly done that. Given the court's previous rulings for Trump, especially last week's ruling that allowed the administration to begin mass firings at federal agencies, did this decision come as any surprise?

4:06This one did for several reasons. One is it came without any explanation at all. What the court's done in prior cases upholding the administration is nitpick the challengers to death, finding small, often semantic defects in what they've done, construing jurisdiction extraordinarily strictly. But in this case, they simply allowed the president to go forward with activities that seemed patently illegal without giving any explanation as to why it was acceptable. Are the Supreme Court's conservatives just ignoring the decisions of the lower courts? Because here, the Boston federal judge said the purge would leave the department unable to perform duties required under U.S.

4:54law. Are the conservatives just ignoring what the district court judges find? They seem to be, which is inappropriate because on questions of fact, appellate courts are supposed to be highly deferential to the lower courts. That's true now. That was true at the time of the founding. So that should not be a difficult proposition for originalists. In this case, as you said, there's no opinion. So we don't know what they base this on. But can we assume that they found the government would win on the merits? That's really the only plausible explanation. The lower court's decision seems to have met all procedural requirements.

5:35The lower court was preserving the status quo, which is a traditional form of an injunction. And clearly there is irreparable injury alleged by the plaintiffs that would be impossible to address if the department is in fact collapsed. So the court must be concluding that plaintiffs will ultimately lose on the merits, but it doesn't tell us how. And I can't guess. Justice Sonia Sotomayor, who wrote the dissent on behalf of the three liberal justices, said the decision was indefensible. handing the president the power to repeal statutes by firing all those necessary to carry them out. Do you agree with her dissent?

6:19I'm afraid I do. The Supreme Court has talked in other settings about the effects of actions when it found the president couldn't be criminally prosecuted for actions taken in office. us. The court couldn't find anything in the Constitution or statutes that supports that. What the court said is the effect of this would be to weaken the president too much. Well, the effect of what the president has done to the Department of Education is to collapse the department. And there's a lower court that heard a great deal of evidence that has reached that conclusion. it's disturbing that the Supreme Court is not recognizing those effects when it was so eager to do so in other cases.

7:10Since April, the Supreme Court has sided with Trump every time he made an emergency request. That's 15 times on issues ranging from immigration and the firing of federal workers to dismissing transgender service members from the military. Is that a contrast to the way the Supreme Court treated President Biden? It's a contrast to the way they treated President Biden, who had many of his most important policies enjoined from day one, including policies that would have been much easier to unwind if they were ultimately found unlawful than, for example, destroying the education department or destroying USAID.

7:53This is also more deferential than we saw in the first few months of this administration, which is even more disturbing. Can you hazard a guess as to why they're giving Trump everything he wants? Are they just throwing up their hands and saying he's the president? Well, the chief justice has long been known for wanting to present as united a court as possible. and the Chief Justice in the first month of the administration was able to get some of his conservative colleagues to join him and the liberals in reigning in the excesses of this administration. I'm guessing that the Chief Justice has reached the point of despairing of getting his colleagues to join him and is not eager to override the administration on bare 5-4 or 6-3 votes.

8:54Trump and Education Secretary Linda McMahon have repeatedly said that this is going to return responsibility for education to the states. But don't the states already have, you know, the brunt of responsibility for education? Of course they do. Education in This country is overwhelmingly state-funded, even more overwhelmingly state-controlled. The Department of Education has been limited to providing additional funds where state and local resources are insufficient and providing things that are more efficiently purchased on a national level, such as curriculum, such as guidance and sharing of best practices.

9:36The Department of Education is one of the least intrusive federal agencies, so the statement doesn't make very much sense. The Trump administration says they want to return education to the states. But on Monday, 24 states and the District of Columbia sued the Trump administration for withholding more than$6 billion in federal funding for education programs. North Carolina Attorney General Jeff Jackson said the consequences could be dire for American students. The effect is going to be massive and it's going to be immediate. This is plainly against the law. It's against the Constitution. It's against the Impoundment Act.

10:16From a legal standpoint, this is not a hard case. So the Trump administration's actions seem to be a little contradictory. Yes, which suggests that this is more of a muralist approach than a different philosophy. You elect a different president, you should expect that they'll pursue a different philosophy. But so far, what we're seeing here is a wrecking ball. We know they're against lots and lots of things. It's not clear what they're for. Trump has argued in the past that, you know, the education department is unnecessary and also a tool of woke culture. The agency is charged with enforcing civil rights laws that bar discrimination in federally funded schools.

10:57And that office is going to be hit particularly hard by this. It's going to lose about half its staff and seven of 11 regional offices. I mean, do you think that's part of the goal here, to eliminate that? It's hard to know because this administration has used civil rights allegations to buttress its attack on colleges and universities. So it's clearly interested in using the education department as a club. If you want to talk about limiting the role of federal government, having it try to micromanage how a university makes faculty appointments and selects people for tenure is a huge overreach beyond the traditional role of the federal government.

11:45And that was not done under Joe Biden or Barack Obama. That's something that this administration has innovated. So they're not very consistent about whether they want a strong or a weak education department. David, you often give me examples from history. Anything in U.S. history that's instructive here? There's one thing that strikes me about this, which is that this court has told us again and again that it's originalist. The fourth law that Congress passed after the ratification of the Constitution was to start creating cabinet departments. So the first Congress understood that it got to choose what cabinet departments we would have.

12:26And you would think an originalist court would pay special attention to that and not allow a president to make these decisions. If George Washington couldn't decide what cabinet departments we would have, surely Donald Trump can't. And another point from history, George Washington refused to run for a third term. Thanks so much, David. That's constitutional law professor David Super of Georgetown Law. And according to a Quinnipiac poll in March, 60 percent of voters opposed Trump's plan to eliminate the education department, with 33 percent supporting it. Coming up next on the Bloomberg Law Show, Trump's antitrust enforcers clear three deals worth$63 billion in one week.

13:10We'll talk about what that signals for the next four years. Remember, you can always get the latest legal news by listening to our Bloomberg Law Podcast wherever you get your favorite podcasts. I'm June Grosso, and you're listening to Bloomberg. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off.

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15:41I see it as my job to scrutinize deals consistently with the timeline Congress created and our antitrust laws. And if we think that they are illegal and we think that we can win in court, we're going to go to court. But if we don't think that they are illegal or we don't think we can win in court, the FTC is going to get out of the way. Federal Trade Commission Chair Andrew Ferguson has repeatedly said that if his agency can resolve issues with a proposed merger, it will get out of the way. And it appears that both Trump's antitrust enforcers are getting out of the way of multi-billion dollar deals.

16:18In the last week of June, the FTC cleared candy maker Marr's$36 billion acquisition of Pringles maker Kelanova. It approved Omnicom's$13.5 billion buyout of rival Interpublic, which will create the world's largest advertising agency. And the Department of Justice cleared Hewlett-Packard's$14 billion acquisition of Juniper Networks. More than$63 billion in deals cleared in the same week. Who better to explain what's happening with the antitrust regulators than my guest, Harry First, a professor at NYU Law School who specializes in antitrust. Harry, the FTC and the Justice Department cleared three deals worth more than$63 billion in the last week of June.

17:09What does this tell you? Is it the change in management? Well, there's certainly a change in management. The question that everyone asked when management changed is what direction? So I think people were looking at two big things. One were the cases against the dominant platforms, the big tech platforms that were ongoing. You had five of those. What would they do with those? And the second is what were they going to do with mergers? So on the first, they've kept them going. They haven't dismissed anything. They're litigating them just like they were before. In fact, emphasizing the continuity of the position the department's taking.

17:48In some ways, maybe not surprising, given sort of the maybe populism streak in the Trump administration. But in some ways surprising because they're moved closer and closer to put up or shut up. You know, you have to remedy these things. So that's where we are with those. The other side was the mergers. And out of the box, they filed the case, HP's acquisition of Juniper Network. And it was the first case they filed. And it looked like a Biden complaint. I think people were saying, look, what they're going to do is they'll pull the merger guidelines that were issued in 2023 by the Biden FTC and Justice Department, widely viewed as pretty aggressive in terms of enforcement.

18:33Yeah, maybe they're going to pull those and pull back from merger enforcement. But what we saw in that first case was they file a case. They cite the 2023 guidelines. They follow them. They say, hey, this case is presumptively bad because it increases concentration. And, you know, they're trying to suppress a more innovative firm. Whoa, that seems to me surprising. So I thought, well, maybe it's something in the changeover. The person who signed it maybe doesn't understand what he's done or who knows, you know, we're not well supervised. But they kept it going. And so the next question is, well, what are they going to do with these cases?

19:13And you're right. Now we're seeing a string of dismissals. Let's look closer at the Hewlett Packard acquisition of Juniper Networks. What was the settlement like there? The Justice Department announced the settlement on a Saturday. Hot news, isn't it? Yeah. Saturday, June the 28th, they announced the settlement of HPE Juniper. This is a$14 billion acquisition. So the settlement that they explained, and this isn't over yet because the judge has to approve it, spins off some part of HPE that does networks for small business. So it looks like small ball. It's not even clear how that's going to affect competition.

19:56Remember, they pleaded that this was highly concentrated industry, anti-competitive, strong head-to-head competition between the two firms. What's the other part? The other part is a compulsory license to the software that Juniper has called MIST. Now, a compulsory license means actually the merge firm gets to keep it. They don't have to get rid of it. All they have to do is license it, for which they'll get some money, but non-exclusively. So they get to keep it. And then do they have a potential licensee for this? No, they don't seem to have anyone. They're going to appoint a trustee. So who's going to take this license?

20:38Is it valuable? Isn't it? Not explained. And they say maybe a second party will show up. Well, if a second party shows up, says a decree, with a bid of over$8 million, dollars, they can have a license too. $8 million might be a second bid. Remember, this acquisition is a$14 billion acquisition. So is a non-exclusive license to this software valuable? Will someone come up and take it? Who might it be? No idea. So that's where we are. Looks to me like we can call it, shall we say, a really weak remedy for a case that's pleaded that looked very strong. So this is your insight into where merger enforcement might be going.

21:24The first case out of the box looks strong when it's pleaded. Looks to me at the moment, hey, maybe more information will turn up, pretty weak on the remedy that they go for to allow the merger to go forward. And this seems to be the mantra that, you know, we've got these strong guidelines on the books that look very pro-enforcement. Maybe we'll file a case and then have a weak remedy. Or here's another good part. Maybe we won't file a case at all and just let these things go through. The Omnicon deal creates the world's largest advertising agency, And they got FTC approval by agreeing to stop withholding online ads for political reasons.

22:13So no economic concessions. You know, another tactic is just to let it go through. And in the advertising agency, it creates the largest advertising agency ever. And for an administration that talks about how horrible concentration is, you have to wonder exactly what's going on. There is one more, smaller, I guess, interesting case in the antitrust division allowing a merger to go forward, and it's a cellular phone merger. And it's T-Mobile acquiring a smaller company called U.S. Cellular, and that they let through without anything. But interestingly, they filed something that's called a closing statement explaining why they closed the case.

22:59This is pretty rare for the Justice Department to do or the FTC. They don't usually explain why they don't do something. And there's a lot of controversy about this. But this one they explain. And I urge people to go and read it because it's sort of funny. It's like I think of, you remember the old Chinese fortune cookies? Oh, yes. And you always thought you'd open one up where the fortune would be, help, I'm being held prisoner in a Chinese fortune cookie factory. Well, this was sort of like that because the closing statement was almost a statement about why this merger was so anti-competitive and why it so needed to be stopped that we didn't do anything.

23:41And what's also sort of great about it, and this is from the closing statement, this is the Justice Department writing, the company understood the unmet needs of customers. This is the company that's going to be acquired, the company that understood the unmet needs of customers. And they called their customers Farmtown Frugal and Heartland Family. All right? This is great. And these in some ways would sound like J.D. Vance wrote this. And they're the consumers you would think this administration purports to want to protect. And instead, what they're going to be allowed to do is to join the Sprint Network, which presumably they decided not to do in the first place when they signed up with U.S.

24:25Cellular. And then it goes on to lament the concentration in the cell phone market. It's a big three. And we, the Justice Department, we don't seem to be doing anything about this. It is truly a curious document. Final curious point on this. Sprint T-Mobile merger was supposed to establish a fourth carrier, you know, through DISH. So Sprint had to give Boost Mobile System to DISH to help them establish a fourth carrier. No hint in this statement that there's a fourth carrier that might emerge, even though the Justice Department is at this very moment supervising the decree that they entered that purported to establish or hoped to establish a fourth carrier.

25:15So this is curious, bizarre, prisoner in the fortune cookie factory material. But again, it's sort of this, boy, we see these problems, but hey, don't think we're going to do anything about it. Harry, FTC Chair Ferguson has criticized the Biden administration for its refusal to negotiate settlements. Listen to what he said and tell me what you think. In the previous administration, a deal would enter the FTC and it would sort of disappear. And sometimes it could disappear for months while, you know, novel ideas were floated, different theories. And sometimes it sort of seemed like the FTC was hoping that deals would die on the vine while they waited for regulatory clearance.

26:00I want nothing to do with that. I mean, you can always make a deal if you're willing to give up a lot. That's not hard to do. You either don't do anything, you know, the cell phone acquisition, or you do something weak, the HP, Juniper Networks merger. There was reason why the Biden administration enforcers said we're backing away from all these deals. It was because the remedies that had been agreed in so many of these deals turned out to be ineffective. There were studies of this that, you know, you'd say, oh, boy, this will reestablish competition in the market. And then it didn't. And so what happened?

26:40The deal basically went forward and we lost competition. Every once in a while, there'd be some good remedy. But basically, the argument was, you know, it's really hard to create competition through these government decrees. The better thing is not to let competition go away by allowing the merger. So, you know, that was the basis of the policy in the Justice Department, the FTC. Not that they didn't settle cases. They did. And not all of them were actually effective. They weren't. But the overall thrust was we're suing, we're not settling. And then parties would put together deals knowing that there was a greater chance of litigation.

27:24Now it's gone the other way. And, you know, I think that this is what a deal-making administration would want. And it looks to me like that's where they're going. Always with the ability to bring suit in a case that suits them. Because the 2023 guidelines have a lot of discretion in them. And the flip side of we'll negotiate a lot is, but maybe not with you. so we have yet to see with whom they are tough. It's always great to get your insights, Harry. Some from inside a fortune cookie. Thanks so much. That's Professor Harry First of NYU Law School. Coming up next on the Bloomberg Law Show, thousands of Afghans get a temporary reprieve from being deported.

28:14We'll talk to their attorney. I'm June Grosso and you're listening to Bloomberg. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off. Deep in the work that moves the business. Let's create smarter business. IBM. This is Matt Rogers from Lost Culture East.