Tuesday, February 7, 2023

Sony is officially fighting Microsoft's subpoena in FTC's Activision Blizzard merger case: public filing confirms PlayStation maker brought motion to quash on Friday

This is a follow-up to my Saturday (February 4) post, First procedural dispute between Sony and Microsoft in Activision Blizzard FTC proceeding: Sony suggests it will cost many millions of dollars to answer Microsoft's questions. In that one, I reported on a motion that Sony had filed on Thursday and which became publicly accessible late on Friday. Sony asked the Federal Trade Commission's Chief (and only) Administrative Law Judge (ALJ) D. Michael Chappell for a fourth extension of time for its motion to quash or limit Microsoft's subpoena. See also Sony doesn't want to provide documents and/or witnesses Microsoft requested in Federal Trade Commission adjudicative proceeding regarding its Activision Blizzard deal.

Microsoft had previously waived its right to oppose three Sony motions for an extension. But when Sony wanted a fourth extension, Microsoft's position apparently came down to "enough is enough." Therefore, ALJ Chappell would have had to resolve the scheduling dispute. But he never had to:

A notice that was filed yesterday and just became public today (PDF) says that on Friday, Sony Interactive Entertainment "confidentially filed with [the FTC's in-house court] a motion to limit or quash Microsoft’s subpoena" and, therefore, "withdraws as moot its motion for extension of time."

The filing reveals that also on Friday, but prior to the motion to quash, Sony "filed a motion for leave to file a proposed reply in support of its motion for extension of time to move to limit or quash Microsoft’s subpoena." That means Sony asked ALJ Chappell for permission to reply to an opposition brief by Microsoft. Neither that motion for leave nor Microsoft's opposition brief are publicly discoverable by the time of publication of this post. But there must have been an opposition brief by Microsoft as Sony would otherwise not have had anything to (ask for permission to) reply to.

There are only two possible reasons for which Sony abandoned its motion for leave to file a reply and brought a motion to quash right away:

  • ALJ Chappell may have told Sony's counsel informally that the motion was going to be denied because a fourth extension is one too many.

  • Sony may have tried to reach ALJ Chappell's office on Friday, couldn't find out what was going to happen, and then brought its motion to quash because it was--in the absence of an extension--running out of time.

Either way, it shows that Microsoft was right to oppose Sony's fourth motion for an extension of time. If Sony had reasonably requested more time, the judge would simply have granted Sony's motion on Friday.

Sony is not just fighting Microsoft's subpoena: it's surprising, if not shocking, that Sony is also unwilling to comply with the FTC's own subpoena. First they asked the FTC to bring this case like no one else did. Then they don't want to answer questions. It's possible that ALJ Chappell also found that behavior bewildering, and that he had this in mind when he saw Sony's motion for a fourth extension of time.

The FTC should generally think again about whether it wants to follow that lawyer--a former FTC official and now a Cleary Gottlieb partner. He also urged the FTC to take a losing position in the Meta-Within context (see my analysis of the order denying the FTC's motion for a preliminary injunction) and told the FTC last week, via Bloomberg, not to worry about losses. Of course he would say that because he knows the FTC can't legally block Microsoft's purchase of Activision Blizzard, but on Sony's behalf he wants them to try at any rate...

There has been some misreporting by others with respect to Sony's motion. I saw some tweets according to which Sony's motion--which was simply incorrect--had been granted and the new deadline would have been this week's Friday (February 10). The source that was credited in those tweets--an EU antitrust lawyer who uses the "Idas" pseudonym to comment on a discussion board for gamers--normally provides accurate information about the Microsoft-ActivisionBlizzard merger reviews around the globe, but in this case he was wrong: his misconception presumably was that he saw the ALJ's order granting the third motion for an extension, but that one had been agreed upon between Sony and Microsoft, and the question was what was going to happen to the fourth request for more time. On Twitter, I--as a litigation watcher who has been following countless U.S. patent and antitrust cases over the past 12+ years--warned people against relying on Idas's unfortunate misinterpretation:

I don't mean to imply that Idas wanted to disinform anyone. He's tried to be totally nonjudgmental about those cases.

Based on Sony's February 6 notice of withdrawal that the FTC published today, we know that rumors of Sony's motion for an extension of time having been granted were greatly exaggerated. The motion was denied for all practical intents and purposes, which is why Sony gave up on it and filed its motion to quash.

I have a problem with the fact that Sony's motion was filed confidentially. It can't remain sealed forever in my opinion: this is a public proceeding. Sony must at least make a public redacted version available, should the motion contain any confidential business information.

Sony may just not want the world to see how uncooperative it is in a proceeding that the FTC brought primarily because of Sony complaining over how it believes to be impacted by the deal. It reserved its rights to fight the FTC's subpoena, it is officially fighting Microsoft's subpoena, and it will likely bring one or more motions to quash in the Northern District of California, where Sony has been subpoenaed already in the so-called gamers' (actually lawyers') lawsuit.

While we're on the subject of that private action in California, Microsoft and the class-action lawyers submitted a proposed briefing schedule yesterday:

DeMartini et al. v. Microsoft (case no. 3:22-cv-8991-JSC, N.D. Cal.), February 6, 2023: Stipulation Re: Briefing Schedule

That filing reflects a cooperative spirit: if approved by Judge Corley (who said at the status conference on Thursday that she'd be fine with anything that meets her key parameter, which is the latest filing date for a reply brief), Microsoft will have until March 2 to file its opposition to the motion for a preliminary injunction, but the class-action lawyers get an extra three days for their opposition to Microsoft's motion to dismiss.

[Update at 9:42 AM Pacific Time] Judge Corley has granted the stipulation and set the deadlines accordingly. [/Update]

A few days ago I published a chart that shows the key deadlines in the Microsoft-ActivisionBlizzard proceedings in the U.S. (FTC and Northern District of California), UK, EU, and New Zealand (click on the image to enlarge):