Wednesday, March 15, 2023

Activision Blizzard acquisition won't close before May 22, Microsoft is prepared to stipulate in San Francisco court

Ahead of a motion-to-dimiss hearing and case management conference on Thursday, Microsoft and the lawyers who are the driving force behind the so-called gamers' lawsuit in the Northern District of California have filed a joint case management statement. Those lawyers are, by the way, frequent losers in such merger cases as I'll show further below.

You can find the document at the end of this post. Here are a few tidbits:

  • Microsoft is now prepared to extend an existing stipulation not to close the merger before May 1 (which the court accepted) by three weeks to May 22, 2023.

    Microsoft recalls that "[t]he regulatory review process in the EU, UK, and several other jurisdictions must be cleared (in addition to defeating the FTC’s promised preliminary injunction motion) so that the merger can close before the drop-dead date in the merger agreement of July 18, 2023."

    The lawyers adverse to Microsoft don't want any of that. They obviously wouldn't talk about their real motivation, part of which is that the court won't let them conduct their own discovery until after the preliminary injunction decision (so far, they get documents from the FTC proceeding--already "totaling over 13.3 million pages of documents of 4,285 gigabytes of data").

    If the past is any indication, Judge Jacqueline Scott Corley--whose court is the single most important U.S. federal district court for the technology industry--is going to be receptive to the idea of pushing back the preliminary injunction hearing, which is currently scheduled for April 12. Any postponement entails the possibility of a hearing never having to happen at all; at least it means other--objectively urgent--items get resolved sooner. The strongest argument is that things remain in flux, as evidenced by Microsoft's announcement yesterday of a 10-year deal (involving Call of Duty) with cloud gaming platform Boosteroid--with more such announcements apparently to come in the weeks ahead.

  • Microsoft's summary of the status of the European Commission's merger review states the exact date on which the EC's Statement of Objections was received: January 31.

    I don't want to read too much into the following, but it is worth nothing that Microsoft says "potential remedies [that are being discussed with the EC] "may or may not be necessary." According to media reports, it was already known that no divestiture remedies were going to be required by the EU's antitrust enforcers. But the three words "or may not" indicate that it is not even a given that any formal remedies will be imposed. In that scenario, the EC could--as it has in other cases including one in which I actively participated over a decade ago--grant clearance based on public statements and such facts as the license agreements that have been concluded by the time the decision is made. I said one shouldn't read too much into it because Microsoft's U.S. lawyers may merely have chosen that wording based on the fact that the EC theoretically could clear with or without formal remedies, regardless of whether a formally unconditional (though based on facts that are tantamount to remedies) clearance is likely to happen. It is known that Microsoft is prepared to address any concerns, and the question is then what exactly a regulator requires. There is always the possibility of appeals (as Microsoft's president mentioned in yesterday's Wall Street Journal), and with a view to an appeal a party would want to preserve its argument that it is actually entitled to unconditional clearance.

  • The part about the CMA says nothing new (see my March 8 post on the UK merger review), and doesn't talk about the possibility of unconditional clearance.

  • The plaintiffs' lawyers subpoenaed Sony, and Sony Interactive Entertainment CEO Jim Ryan isn't too interested in talking to them: he could have authorized U.S. lawyers to accept the subpoena on his behalf, but instead he wants to be served in his country of residence, the UK, which would take some time. While I have criticized Sony for not being as cooperative with the FTC as they should be, I don't blame them for not wanting to talk to those class-action lawyers from California.

  • Activision Blizzard has brought a motion to quash their subpoena. In that one, they ridicule the track record of those lawyers ("counsel with a long history of unsuccessful challenges to high-profile mergers just like this one") and provide a long list of failures of those lawyers:

    "In recent and past years, Plaintiffs’ counsel has filed a series of unsuccessful, eleventh-hour challenges to high-profile mergers that either had closed or were about to close. See, e.g., Bradt v. T-Mobile US, Inc., 2020 WL 1233939, at *1 (N.D. Cal. Mar. 13, 2020) (denying motion to enjoin merger pending appeal after plaintiffs lost motion for temporary restraining order); Dehoog v. Inbev, 2016 WL 5858663, at *1 (D. Or. Oct. 3, 2016) (dismissing antitrust challenge to merger of Anheuser-Busch InBev and SAB Miller), aff’d sub nom. DeHoog v. Anheuser-Busch InBev SA/NV, 899 F.3d 758 (9th Cir. 2018); Taleff v. Sw. Airlines Co., 828 F. Supp. 2d 1118, 1125 (N.D. Cal. 2011) (dismissing antitrust challenge to merger of Southwest Airlines and AirTran); Cassan Enters., Inc. v. Avis Budget Grp., Inc., No. C10-1934-JCC, slip. op. at 6 (W.D. Wash. Mar. 11, 2011) (dismissing antitrust challenge to Avis’s proposed acquisition of Dollar Thrifty); Malaney v. UAL Corp., 2010 WL 3790296, at *15 (N.D. Cal. Sept. 27, 2010) (denying motion to enjoin merger of United Air Lines and Continental Airlines), aff’d, 434 F. App’x 620 (9th Cir. 2011), cert. denied, 132 S. Ct. 855 (2011); Golden Gate Pharmacy Servs., Inc. v. Pfizer, Inc., 2009 WL 3320272, at *2 (N.D. Cal. Oct. 14, 2009) (dismissing antitrust challenge to merger of Pfizer and Wyeth); Ginsburg v. InBev NV/SA, 649 F. Supp. 2d 943, 952 (E.D. Mo. 2009) (dismissing antitrust challenge to InBev’s acquisition of Anheuser-Busch), aff’d, 623 F.3d 1229 (8th Cir. 2010); Madani v. Shell Oil Co., 2008 WL 7856015, at *4 (C.D. Cal. July 11, 2008) (dismissing antitrust challenge to joint ventures between Shell and Texaco), aff’d, 357 F. App’x 158 (9th Cir. 2009); Am. Channel, LLC v. Time Warner Cable, Inc., 2007 WL 1892227, at *7 (D. Minn. June 28, 2007) (dismissing antitrust challenge to Time Warner’s acquisition of Adelphia)."

    There are many better class-action law firms in the United States. It is telling that no high-profile firm is challenging the merger. Only some habitual losers are. (I was just talking about class-action firms, not about a government agency that has also been losing a bit too often lately and may or may not bring its own PI motion.)

  • I read between the lines that those class-action lawyers are costing Microsoft's counsel a lot of time, which has cost implications. The class-action lawyers say they don't want to engage in alternative dispute resolution (typically mediation), and that's because it would slow down things. But I'm sure that all they want is a settlement, and increasing the cost of Microsoft's defenses appears to be part of their strategy.

Here's the joint filing:

DeMartini et al. v. Microsoft Corp. (case no. 3:22-cv-8991-JSC, N.D. Cal.): Join Status Conference Statement