Morning Brew Daily - Judge Blocks Spirit-JetBlue Merger & Uber Shuts Down Drizly

Episode Date: January 17, 2024

Episode 237: Neal and Toby explain why a judge blocked the Spirit-JetBlue merger and why it is a big win for President Biden's Justice Department. Plus, the new law that could increase child tax breaks and how changes in fishing regulation could impact the administrative state. Next, Uber is shutting down Drizly and the UK Post Office scandal you need to know about. Finally, why the feds are banning humorous jokes from highway signs. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning, Brut Daily Show. I'm Neil Fryman. And I'm Toby Howell. Today we'll explain how a TV drama exposed one of the biggest miscarriages of justice in British history. Then the Spirit Airlines JetBlue merger has been spirited away by a federal judge. It's Wednesday, January 17th. Let's ride.

You know what, Toby, I think I might buy a ticket to fly to Indianapolis. I do not have anything to do there, but the airport just became the coolest one in the country because it installed a full-length basketball court inside the terminal ahead of the city hosting the NBA All-Star game next month. It makes a ton of sense. Indiana is crazy about basketball, and the NBA has always been comfortable with traveling. Can you imagine you meet up with a bunch of people before your flight?

You become best friends. You're playing five-on-five. Then fly off to never speak with them again. That is an ideal friendship, in my opinion. But I have to say, I'm ultimately against this. what if your seatmate had just played an hour of pickup that squishes into the seat next to you, just sweaty as I'll get out. I'm out on the basketball court.

It could cause planes to start to smell like locker rooms. And I think airlines would have to change their beverage offerings when they fly to Indian or in or out of Indianapolis to include maybe Gatorade. I do want to go do. Let's put the pod on the road and go play little fives. Before we jump into the show today, we have a quick word from our sponsor, Veem. I was just jamming on the way to work this morning, listen to a fantastic song. All right. Tell the people what it is.

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You win? Must be 21 to enter. JetBlue's proposed $3.8 billion acquisition of Spirit Airlines is no more. A federal judge blocked the merger of mid-sized carriers, following a lawsuit by the Department of Justice, alleging it would reduce competition and potentially lead to higher airfares. Spirit isn't just a bright yellow punchline to air travel jokes. It's also the nation's largest low-cost carrier,

and according to the judge who passed down the ruling, folding that into JetBlue, which tends to charge higher fares, would harm consumers by reducing the availability of budget-friendly options. The ruling does leave the door open for other carriers to make bids for Spirit, so given that its stock fell 47% yesterday on the news, we likely haven't seen the end of new acquisition efforts. This is also a big, big victory for the Biden administration's efforts to prevent further consolidation in the airline industry

after a series of stumbles when it comes to regulating big tech. Neil, Spirit's stock got obliterated yesterday after this, decision, while JetBlue rose slightly. Was this a surprising outcome in the end? I don't think so. I mean, the Biden administration, the DOJ has been very, very aggressive in attacking mergers across the board. And I think the airline industry is one of the most notable examples of consolidation. You have four airlines that have 80 percent market share, Southwest United American, and Delta. Over the past 50 or so years, they've made. made 46 acquisitions. So there's been tremendous consolidation. And maybe, you know, JetBlue and

Spirit came in after this wave of consolidation. They're kind of bearing the brunt of what happened before. But the Biden administration has taken, you know, a very close look at airlines because people know that when you fly to certain areas, there's only a few, a few possible airlines that you could possibly choose. And Spirit, they identified Spirit as really this unique position in the airline industry as one that drags down airfares across the board. Yeah, I mean, if you just look at the differing reactions, though, by stockholders of each company's JetBlue stock rose. If we go back to the terms, JetBlue actually agreed to pay Spirit a reverse breakup fee

of $70 million and also pay Spirit shareholders $400 million if the deal kind of fell through. It did fall through and they'll have to pay these penalties, yet its stock still went up, which kind of goes to show that JetBlue shareholders were not very on-bush. board with this plan, even from the gatego. Their idea was to repaint and refit Spirit Airlines airplanes with their JetBlue colors and the JetBlue TVs. It just never seemed to make sense on paper, and now it's kind of dead in the water. These two airlines, too, are two loss-making airlines. The past couple years have not been great for either of them. JetBlue lost more than two billion since the start of 2020. Spirit, which has also been weighed down by kind of weaker demand.

has lost more than $1.6 billion. So this was kind of a merger of two equals, but they're both not on great footing, either one of them. Well, the problem is that the judge identified Speer as this critical cog in the airline industry because it is very important in suppressing prices across the board. But what happened is we don't know if Spirit is going to continue to exist after this.

It really needs a buyer. The shares crashed, as you said, 50%. And you have these analysts yesterday saying, look, I mean, if there isn't another savior of spirit, then it could file chapter 11 and go and be liquidated. Yeah, and so this could open the door for Frontier to make another attempt to buy spirit. Remember, that was a deal that was announced back in 2022, but then JetBlue kind of came in with a better offer. So those talks should be resurrected from the dead. This decision has ripple effects as well for the Hawaiian Alaska Airlines deal.

Remember, Alaska Airlines wants to buy Hawaiian for around a billion dollars. That is up in the air now because clearly regulators are not on board with airline consolidation. Moving on, performance review season must be coming up on Capitol Hill because this historically unproductive Congress just produced a bill that could wind up benefiting both low-income families and companies. The $78 billion compromise between Republicans and Democrats is definitely, if you scratch my mind, back, I'll scratch yours deal. The bill would expand the child tax credit, a priority for Democrats by giving more relief to low-income families with multiple children. Republicans, keen to roll back tax burdens for corporations, inserted language to make it easier for firms to claim tax deductions on interest expenses, R&D expenses, and investments in equipment. This bill has a long

journey ahead to become law, but if it does, it'd be a huge bipartisan win. Democratic Senator Sherrod Brown said, I don't want to say, a legislative miracle, but it almost is, considering that expanding the child tax credit seemed dead in the water just a few months ago. So the race is on to get this passed before tax filing season begins. Yeah, you don't hear the term bipartisan very often these days, but it did seem like everyone got kind of what they wanted out of this bill. There's not a guarantee that it will actually get done, though. Like, people keep qualifying it. They want to get the passed by the beginning of tax filing season, which is January 29th. Not, that's 12 days away.

So there's also all these other priorities kind of weighing over Congress that could potentially kill this bill. Most notably, there's a government shutdown looming at the end of this week, and they're trying to complete their funding process for the government by March. So even though this is being upheld as this Congress, which has been historically unproductive, finally working together, there are still external factors that might lead to this bill not ending up passing. If it does, if it does qualification, this would be a huge,

win for people who promote the expanded child tax credit. Because go back to 2021 and Biden unveiled huge sweeping measures during COVID to help out families. He expanded the child child tax credit from $2,000 a year to $3,000 a year per child. This was credited with cutting child poverty rates nearly in half. It was also pretty expensive. It cost $100 billion. But advocates say, this is completely worth it. We literally cut child poverty rates in half. Those lapsed in 2020. too, and Democrats have been on a mission to get this back on board and with a Republican Congress, it has not really happened. But the fact that they got some of these, some expansion here, and it's not the most widespread expansion because what Biden did in 2021, he allowed for monthly payments.

Now it's still going to be a yearly payment related to your tax filing. But the fact that they got some movement here, I think it is surprising to them. And so how are they paying for this? because, as you said, it is a very expensive program. They're sunseting in this kind of failed pandemic error program, very fraud written, and it's called the Employee Retention Credit. This was a bit of a disaster. It was initially started to help struggling small businesses stay afloat during the pandemic, but it started into this massive headache for the IRS, given all the fraud that's being perpetuated.

Small business owners have said that they've been bombarded by radio ads, faxes, emails, other solicitations trying to get them to pay a fee in order to see if they qualify. for this expanded employee retention credit. So if you sunset that program, which has been costing the government, billions and billions of dollars, you can kind of port that money over to this much more popular child tax credit. All right, let's move on. We got another Supreme Court case coming down the pipeline

that could upend 40 years of precedent when it comes to how federal agencies wield their power influence over private industry. Today, the justices are hearing two appeals aimed at reducing the power of regulators when it comes to interpreting unclear laws. There is this precedent called the Chevron Doctrine, which is a legal principle that says if a law is ambiguous, court should defer to a, quote, reasonable agency interpretation of the statute that gives a lot of power to federal agencies to set the law whenever there is gray area. In the cases the court is hearing, two fishing companies are challenging a rule handed down by the national. Marine Fisheries Services, a federal agency, that requires some herring boat owners to cover the 710 daily fee to pay government-approved observers on their ships. Two lower courts invoked Chevron, saying the application of the fee was a reasonable interpretation by the agency, but the two fishing companies thought it was an unfair tax on their livelihoods.

A rash of conservative and corporate interest groups have been wanting the current court to take a crack at the Chevron principle and do away with some agency power. And today is their chance. This case is amusing a lot of people because this Chevron statue is one of the most frequently invoked Supreme Court cases regarding regulatory power in history. And it's being challenged by a bunch of fishermen. So this sort of dichotomy of huge stakes and not to say the fishermen are low stakes, but it's kind of like an obscure thing going on with the herring fishing. You know, the dichotomy there is not lost on people, but it is very fascinating to look at this specific fishermen case because herring has been overfished on the East Coast, as everyone knows.

And then the Trump administration 2020 invoked the, or put quotas on. So basically, you have to have these monitors to go on your boat with you and count how many fish you catch. Or if you catch any other types of fish, they need to know about it, regulators. But they changed it so that the fishermen themselves have to pay the $700. $700 fee to these monitors. And that, and sort of conservatives who wanted to attack Chevron for decades have looked at that particular case. And they're like, fishermen, you should sue the government so we can finally get this rolled

back. And now we're all the way up to the Supreme Court. Yeah, it is so interesting that to them, this is just their livelihoods that they're protecting, but to kind of this monolith that's been against the, has been at war against the administrative state, as it's been called, as saying like, yes, yes, this is our chance to finally attack that Chevron principle. And this Supreme Court has definitely signaled their skepticism towards expanding regulatory power. They've done lots of rulings where they've kind of reigned in the EPA and other agencies. And just to be clear, though, this definitely has

ripple effects. Like the Chevron principle isn't just good for expanding agency power. It's also good for agencies deal with a lot of like these really small, obscure arcane, uh, legal proceedings that don't have to go to courts because they are dealt with by by agency. So if you throw out Chevron, then suddenly the judges have all the power in determining how certain cases are handled, which is fine if you want it going through the legal courts, but it could just bog down the legal courts because so many of these smaller, more niche disagreements have to be ruled on, and it's typically been by agencies, but now it might be by courts. It is a philosophical question of whether you try.

trust government bureaucrats to be experts in their field and make decisions. That's really like the big question here. Conservatives of limited, conservatives who advocate for limited government say we should put all the power in courts and Congress and the more progressive faction, the more people who are who are more advocates of regulation and sort of the federal agency apparatus, say these people are experts in their field. They should make decisions when it comes to ambiguous rulings by Congress. And this will have huge impacts on not just, you said, not just this particular industry, but think about the industries of like crypto and AI, right? Like we don't have any laws, that many laws on the books regarding AI and crypto. They were just invented recently.

So when you make a decision on them, right, when you make regulatory decisions on them, you have to go back to stuff written in the 60s and 70s, which is not going to say anything about crypto or AI. It's going to be pretty vague. So it's very high stakes about who makes the decision on what, on how. to interpret laws that were written 50 years ago for something like Bitcoin. All this from two herring boat captains. There are ripple effects. Okay, before we jump into the next story, we're going to take a quick break. Good sleep is everything.

That's why Ali's science back support is made with a blend of melatonin and L. Deane for both kiddos and grownups. So when your mind won't switch off, you've got something that can help. You're racing thoughts and restless nights won't stand a chance. Find Ollie's sleep solutions for the whole family at Ali.com. That's OLLLY.com. This next story will mean a lot to anyone listening who's been in college at any time in the last 10 years. Remember Drizzly, the alcohol delivery service that would come in clutch from time to time when supplies were dwindling?

Well, Uber, who bought it less than three years ago for over a billion dollars is shutting it down. Despite its lofty price tag, the two were never a perfect match. Drisley provided back-end tech to liquor stores to make their own deliveries, which isn't quite, the same job as Uber, who prefers to use their own contract workers. Also, there was this major cybersecurity snafu back in 2020 that exposed the information of around two and a half million customers that resulted in the FTC order. It all added up to be too big a headache for Uber, who would rather just use its, who would rather users just order alcohol directly within the Uber Eats app instead of splitting their business between two services. One point one billion to zero

in three years, Neil, turns out that drinking and driving, don't remember. really mix. You know, Toby, we all made these knee-jerk purchases during COVID that we don't use anymore. I don't know what you did, but I have a bunch of kitchen stuff that I maybe haven't used, and I think this is exactly what Uber did when it purchased Drizley back during COVID. I mean, it was really important for it to boost its delivery business because its ride-sharing business had very much collapsed, and all of a sudden you saw Uber Eats and its delivery business completely eclips ride-sharing. And so there was its whole business, was basically inverted. So it was like, okay, this is the future. Delivery. Everyone's going to get delivery.

Alcohol, food, literally anything. So it bought Drizley for over a billion dollars. It bought Postmates for $2.65 billion. And now it's looking, you know, things have sort of normalized. Its ride sharing business has now back is back to above its delivery business. And while its delivery business is still important to it, I think it realized that it made a little bit of a COVID-need-jerk mistake here. Yeah, it's been a fall from Grace because if you go back to that kind of pandemic era, Drizzi, it'd become the largest online marketplace for alcohol in North America. So Uber probably thought it was getting like this up-and-coming, this new delivery segment as well. I think people sleep on Drizley a little bit as an industry pioneer. It was founded all the way back

in 2012. No one was really doing alcohol delivery like this. So Uber, I mean, Uber was hardly even a thing back then. It was only founded in 2009. So, It is one of those things that, yeah, at the time, it seemed to make a lot of sense because that was the growing segment for Uber, but now, as you said, ride sharing has totally recovered and is doing a lot better than it was back then. A few other things are in play here. I think alcohol delivery is not that big of a market as expected. People still, there are liquor stores wherever you look.

People don't really order liquor as much as Uber expected. And Uber is looking at its Uber Eats app and its Uber app as one. cohesive structure. It's realizing that having multiple apps floating around the places, maybe not, it's, you know, maybe not the best strategy. And it wants to condense all of these services. And it's expanded into a bunch of different services as well. It does returns now, has all these different things that it's kind of folding into this app. And, you know, Dara, the CEO, has said for years that he wants the Uber app to be your one-stop shop for micro mobility, for anything that you do for getting around, whether it's people or goods. We want you to go. We want you to

to Uber. So the fact that Drizley was there kind of dangling was maybe a little bit of a distraction. The question now is what happens with Postmates too. Right. I could see it being folded in eventually as well because you're right. I mean, Uber already offers these exact services in the- do offer alcohol delivery through routes. Right. So if any college students are listening to this, then yes. If you didn't know that, I guess Uber eats. And in a few, in 36 states, not all of them. Probably not Utah. Okay, we have covered a lot of gripping stories on this show, but this one may be the most extraordinary, so I hope you're sitting down. Essentially, what happened is a TV show that aired in the UK this month

has created public outrage over one of the worst miscarriages of justice in British history, leading to petitions with one million signatures and an entirely new law. The show, a drama called Mr. Bates v. the Post Office, tells the story of the more than 700 people who were convicted of crimes they didn't commit while working as branch managers for the post office. In a campaign that lasted between 1999 and 2015, these workers were convicted of stealing from the post office when in reality it was a faulty IT system

that led to false shortfalls in their accounting. Many of these people's lives were ruined emotionally and financially from the ordeal, not least because their contracts stated that they had to make up the shortfalls from their own pockets. Some went to jail, some died by suicide, and many more have been tormented. for years, and the fight to clear their names has been an uphill battle led by the worker named Alan Bates, who is the protagonist of this show.

So, this whole scandal has been playing out for decades, kind of under the radar, until this show comes along. Millions of people watch it, forces the government to finally take action. Last week, facing intense public pressure, Prime Minister Rishi Sunak promised a new law to exonerate and compensate all known victims. It's insane. This story, we were both messaging back and forth. it just makes you so mad because these people's lives are being ruined by this faulty software.

At one point between that period, you mentioned, an average of one person a week was being convicted of these crimes that they really weren't committing at all. It also hasn't really been rectified in any meaningful way either. To date, there's only been 93 convictions that have been overturned. Luckily, with the airing of this show, which just goes to show kind of the power that media still has in shifting public opinion. And we finally have this lobbying pace that should help these families recover. But some of this damage is irreparable, and you can't do anything about it other than just apologize and try to compensate the people involved.

A lot of the ire and focus is now turning to the vendor who supplied the IT system to the government, Fujitsu, a Japanese company that has a European office. And they were kind of hauled into the parliament earlier this week, yesterday, actually, to kind of talk about what happened and ask what they're doing about it. And the head of the company's European branch said, look, we have apologized, we know we're doing wrong, and we feel morally obligated to help compensate the victims. But that is a whole other question here.

It's who's liable, like, who can be held accountable for what happened? What's insane to me, too, is that this system is still being used by the person. They still have the contract. It does seem like if there's one person to punish here, it's Fujitsu. and as the vendor who supplied this faulty software, and yet they're kind of doing these crocodile tears are saying, oh, we feel morally obligated, but, like, again, there's still been rewarded with the contract.

I think you have to ditch the contract, find someone else to take over, and that's the person who should take the brunt of the blame. Yeah, and it's interesting. You mentioned at the top about how TV really appealed to the hearts and minds of people, because there have been reports about this for years. Like, people knew about it.

There were investigative journalists working on the case, But then this drama comes out and it really just appeals to people's emotions. And we've seen that before. Ava DuVernay released the movie when they see us about the Central Park Five in 2019. That made a lot of people aware of what happened there and led to reparations for the people, for the victims of that. And then there was this dopesick series that came out in the U.S. about the opioid crisis in 2021. That led to a lot of major art institutions rejecting funding from the Sackler family, which owned Purdue Pharma. there is a pattern here of dramatizing a particularly compelling story about injustice happening

and at least a little bit being rectified. But it is kind of sad that you have to make a TV show about it to get people to care. I want to see it. It seems like the peak of the problem. It does seem like a really good TV show. Very harrowing, obviously. Okay, to close out our show, I want to introduce a new segment called Buzz Killington of the Week. And the inaugural award for who killed the Buzz Most this week goes to the Federal Highway Administration. In December, the agency is issued a new set of guidelines that bans highway signwriters from using pop culture references or humor, arguing they could be a distraction to drivers. States have two years to implement these changes.

As many drivers have noticed, digital highway signs have come a long way from the quaint rhymes of click it or ticket, evolving into a canvas for jokes, sometimes with that regional flare that also send the message to drive carefully. I got to go through some of my favorites here. In 2022, New Jersey, flash slowdown. This Ain't Thunder Road in an excellent reference to its hero, Bruce Springsteen. Deck the halls, not the guy who cut you off. Christmas lesson we all needed to hear.

And then get your head out of your apps, also a classic, and camp in the woods, not the left lane, both simple and effective. Toby, do you think this crackdown and funny sign writing is warranted? I mean, there is an argument to be made that these signs are a distraction, which is kind of the logic behind this. And some people were even pulling over and taking pictures of them, which seems antithetically. to what they were trying to achieve with safer driving. You know what's going to struggle the most is actually Arizona. They have more than 300 electronic signs above its highways. And for the last seven years, they've actually had a contest to find the funniest and most

creative messages. So this was not something by any rogue sign operators. This was a concerted effort because a lot of people thought that the way to get people to kind of accept the message they were being delivered was to do it in a humorous way. So I could potentially see there being some pushback to this new regulation because There are studies, too, that have kind of, it's very hard to actually determine how these signs are being effective unless you camped out and had binoculars and see how many people actively put their seatbelts on. But there's been other studies that monitored brain activity when they see these signs.

And when they were, signs were humorous, their brains would be flooded by, like, good endorphins and they paid attention. Yeah, they paid attention, essentially. And so there are literally scientific studies to say that using humor in these signs does help convey them. message so I'm totally against this obviously I need a little wit yeah this whole this whole thing started a couple years ago when these highways had these blank signs right and if nothing happened if there was no crash or nothing to tell the people about they were these agencies people working they were like well what the heck do we do with them they're blank maybe we should make these funny signs and I think they work a lot I think maybe the guidance could be less don't do it all just like don't be obscure

and use like random references because sometimes they cut pretty deep like Taylor Swift lyrics you didn't get Thunder Road though you should have I know there's some yeah so there are these deep pop culture references around the winter time they also do like stuff related to Christmas movies that not everyone has seen so I feel like the guidance could have been be tasteful don't use like deep cut references. What a fun job though if we weren't doing this I want to be a highway sign writer well there is this theme of government agencies kind of being funny now and kind of reverting their reputation a little bit. I mean, the New Jersey Twitter account a few years ago kind of went a little bit rogue. The National Park Service

makes a lot of jokes. And I think so it's that unexpectedness. Maybe they're not even that funny in general, but you just don't expect. The bar is so low. The bar could not be lower. Okay, that is all the time we have for the show today. I hope you all have a wonderful Wednesday. Toby, what is our swing thought? Our swing thought of the day is, quote, we're not going to talk about what we're going to accomplish. We're going to talk about how we're going to do it from former Alabama football coach himself, Nick Saban. So don't fall victim to that dopamine rush you get from telling people how great your

new fitness regime will be or how awesome that one business idea will be. Embrace the process, get in the weeds, and start doing the dang thing. I love that one. I'm all about just not telling anything what you're doing and just go and do it. That one's great. Thanks, Toby. As always, you can write in with your thoughts on any of the topics we discuss to our email MorningBrewdaily at MorningBrew.com.

Let's roll the credits. Emily Milliron is our editor and producer. Samantha Vellas and Raymond Lue are associate producers. Lonnie Fiscus is our technical director. Billy Minino is on audio, hair and makeup obeys all the highway signs. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great. So today, Neil.

Let's run it back tomorrow. Hey, Mama. Thanks for making all my favorite recipes. Hi, Ma. Thanks for your unfiltered advice. Hi, Mom. always being by the phone. Hey mom, happy Mother's Day.

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