Tuesday, January 3, 2023

Microsoft-ActivisionBlizzard remedies to be agreed upon in EU and/or UK will be proposed to FTC: first hearing held in U.S. adjudicative proceeding

The Federal Trade Commission's Chief (and currently only) Administrative Law Judge, D. Michael Chappell, just held a telephonic hearing in the adjudicative proceeding brought by the FTC against the acquisition of Activision Blizzard by Microsoft. There were some technical issues as far more people--many of them presumably risk arbitrageurs and members of the legal community--wanted to dial in than they had anticipated. I agree with Judge Chappell that the AT&T operator appeared to handle the situation well under the circumstances.

The hearing was short and procedural as opposed to evidentiary. Just a few points:

  1. FTC staff attorney James Weingarten said there was no parallel proceeding in district court at this stage and there were no plans at this time, but the FTC may seek to block the transaction in the future depending on how things progress.

  2. It seemed to me that the FTC is not giving more than lip service at this stage to the possibility of working out a settlement. But it appears that at least the lawyers for all three parties (FTC, Microsoft, Activision Blizzard) are in a position to reach agreements on scheduling questions.

  3. Microsoft's lead counsel Beth Wilkinson mentioned the July 18, 2023 termination date in the meger agreement and said her client was "preparing for all options." While "a resolution would be ideal," the other options include an in-house FTC trial or a trial in federal court, where Microsoft anticipates the FTC may have to run pretty soon.

  4. Mrs. Wilkinson made reference to a number of regulatory reviews in different jurisdictions, some of which have already cleared the deal (most recently Chile), and expressed hopes of receiving clearance in each of them over the next few months.

  5. She placed particular emphasis on the processes in the European Union and the UK, where there appears (as far as I understood it) to be a possibility of near-term settlements, and the remedies agreed upon with the European Commission and/or the Competition & Markets Authority will then also be proposed to the FTC.

  6. Microsoft's counsel exuded confidence as well as a constructive attitude. Activision Blizzard's counsel--parts of whose answer to the FTC's complaint were belligerent--had nothing to add. But again, this was just a case management conference and not about the merits, so there wasn't much to be said.

A scheduling order will issue shortly.

I saw a recent report according to which some Brussels observers believe the European Commission will issue a Statement of Objections (SO) this month, but that a settlement could fall into place thereafter.

In related news, various articles have appeared over the past 24 hours or so that suggest Microsoft is unreasonably denying knowledge of the release date of Activision's Call of Duty title. I tweeted about one of them:

I commend Matt Stoller for having raised a number of Big Tech issues over the years, and The Verge for its efforts to cover certain tech competition issues in depth, but in this context they--and those who echoed their views--were simply wrong. The mistake they made was to expect Microsoft to comment on something that concerned Activision Blizzard. Microsoft simply can't make an admission on Activision Blizzard's behalf, and there is a reason why parties have the choice not only between admitting or denying, but also declining (where appropriate) to take a definitive position.

The answer is simply in Activision Blizzard's filing. Paragraph 6 of its Specific Responses to the Commission's Allegations contains the following passage:

"Activision denies the allegations of the second sentence of Paragraph 6, except to admit that it released the first entry in the Call of Duty franchise in 2003 and that it has released at least one installment in the Call of Duty franchise every year since 2003." (emphasis added)

There is nothing "petty" or "bizarre" here: Activision Blizzard confirmed the release date, and it would have added no value at all if Microsoft had done so as well.

It may have been tempting to engage in "clickbaiting" at a time when there's a shortage of tech industry news, but I would strongly recommend to some commentators and reporters to read both Microsoft's and Activision Blizzard's filings in the FTC case before blaming one for not addressing something we may be able to find in the other.

Share with other professionals via LinkedIn: