A new filing was made last night in the so-called gamers' lawsuit (more accurately, lawyers' lawsuit) over Microsoft's purchase of Activision Blizzard (NASDAQ:ATVI). As per Microsoft's request, Judge Jacqueline Scott Corley of the United States District Court for the Northern District of California had set an expedited briefing schedule and a motion hearing for tomorrow (January 19, 10 AM Pacific Time) with respect to Microsoft's motion to stay the case pending regulatory proceedings concerning the same transaction. The plaintiffs' lawyers, who are primarily in the class-action business, oppose Microsoft's motion. First, the document:
The following sentence (found on page 7) reveals that this case is indeed designed to become a class action at a later stage:
"If Microsoft were to merge before Plaintiffs can be heard on their Section 7 claims, Plaintiffs’ case will transform from seeking prospective injunctive relief, to a claim for dissolution of an already formed merger, plus damages for the loss of competition that would ensue." (emphasis added)
It's obvious that seeking damages for ten gamers would not make economic sense. To the extent that they claim some games would become unavailable on the PlayStation, they could just switch to another game (as 61% of the gamers who responded to a survey by Chile's competition authority said they would) or, in a worst-case scenario, switch consoles (as only 20% of the Chilean respondents said they would). Even if they persuaded a jury that the average game costs, say, $10 more after the merger than before (which would be impossible to prove given that there would still be plenty of competition in the games business), that would also be a negligible amount as compared to litigation expenses.
What they will do in that scenario is seek class certification.
But for now, they claim they don't even want to get there and tell the court that they want to prevent the merger from being consummated in the first place, but in order to do so, they say they need a preliminary injunction--and they want to start discovery now, not later.
The class-action lawyers say that any the regulatory proceedings that currently prevent Microsoft from closing the deal could go away anytime, or Microsoft might go ahead anyway. The way I view it is that those regulatory hurdles--clearance decisions required in some key jurisdictions--are not all going to go away on the same day. Right now, there are multiple roadblocks in place, which is why the FTC isn't seeking a preliminary injunction yet. The class-action lawyers attribute this to "the FTC's lack of vigor," a counterintuitive accusation when we're actually seeing regulatory overreach.
They also say that the FTC "does not represent the interests of Plaintiffs" and "is under no obligation" to do so anyway. And they try to distinguish their copycat case from the FTC's in-house lawsuit, pointing to differences in legal standards (between the FTC's in-house adjudicative proceeding and a federal lawsuit) and claiming their case "is broader" because, for example, it also comes with an allegation "that the trend in consolidation in the industry factors into the merger’s unlawfulness."
According to the class-action lawyers, a stay would be tantamount to abstention, meaning that a court lets other jurisdictions or fora resolve the matter instead of doing its job. But it doesn't appear to me that the plaintiffs would never get their day in court if the case was stayed at this stage.
There are at least two aspects of the class-action lawyers' argument against the motion to stay that I struggle with:
The class-action lawyers could always move for a temporary restraining order (TRO) should the circumstances change so that they couldn't wait for a decision on their PI motion. For instance, if the FTC and other regulators were to settle with Microsoft by accepting some commitments, the deal still wouldn't close the same day for practical reasons and Judge Corley could enter a TRO if warranted (which is a big question mark, but procedurally it is possible). A TRO would be in force for a maximum of two weeks unless the enjoined party agrees to wait a little longer until the PI motion is resolved. It's more preliminary than a preliminary injunction.
I don't see a convincing argument here that there is "irreparable" harm to the plaintiffs. The only kind of irreparable harm here is that the class-action lawyers would like to go forward with the PI process and with discovery so they spend time for which they can later ask to be compensated. In a hypothetical scenario in which the merger would be canceled, the case would be moot, so there would be no more discovery and no PI process. So it's a problem only for the lawyers, not for the gamers who allowed the lawyers to name them as formal plaintiffs.
There are various ways forward for the court. It could stay the case as requested; it could require Microsoft to give notice of a change in circumstances where the plaintiffs might want to file a TRO motion; it could define the circumstances under which the plaintiffs would have leave to request that the case be unstayed. Let's see how Judge Corley exercises her discretion.
The class-action lawyers stress that the Supreme Court held public and private antitrust actions over the same matter can go forward in parallel. But it's also a fact that those private piggybacking cases are assigned a far lower priority by this district court as well as others.
