Tuesday, April 11, 2023

Microsoft signs next 10-year cloud gaming deal; Sony provided charts to spruce up the so-called gamers' lawsuit over Microsoft-ActivisionBlizzard, and its lawyers may have ghostwritten the new complaint

In the latest news concerning Microsoft's acquisition of Activision Blizzard King, Microsoft's Xbox executives announced this morning a 10-year cloud gaming agreement with UK internet service provider EE:

Microsoft has previously entered into such agreements with Nvidia, Boosteroid, and Ubitus. The fact that EE is a British company makes the timing particularly interesting. According to the Policy and Regulatory Report (PaRR), the UK Competition & Markets Authority (CMA) will likely send its draft decision and remedies working paper to Microsoft and ABK this week. Thereafter, the parties get five working days to respond, and then the ruling will be finalized.

In other Microsoft-ABK news, the class-action lawyers behind the so-called gamers' lawsuit in the Northern District of California just filed their amended complaint after the original one got thrown out as a result of a Microsoft motion to dismiss. I mentioned that dismissal in a recent post. Originally those lawyers, who have lost numerous merger cases of a similar kind, told Ars Technica they wanted to file about two weeks ago, but instead they exhausted the deadline (formally 20 days, but practically 21 because of the weekend) until almost literally the last minute: they filed only a very few minutes before midnight Pacific Time. First, the document:

De Martini et al. v. Microsoft (case no. 3:22-cv-8991-JSC, N.D. Cal.): Amended Complaint to Prohibit the Acquisition of Activision Blizzard by Microsoft Corporation in Violation of Section 7 of the Clayton Antitrust Act, 15 U.S.C.

They've given up on their labor market theory, which was an attempt to differentiate their theories from those pursued by the FTC in its in-house adjudicative proceeding. They lacked standing because the plaintiffs may be able to claim that they play games, but not that they're gamne industry employees.

Those lawyers have lost various merger cases as the following excerpt from a filing by ABK shows (click on the image to enlarge):

The new complaint they filed last night might still be dismissed (in whole or in part), but it's going to be harder than last time because now they've tried hard to present facts that they hope meet the plausibility threshold.

Since the original complaint in December, a number of documents have been released by regulators, particularly the UK CMA's provisional findings and responses to them. Also, the class-action lawyers have received some material as a result of initial discovery. The court's original idea was to just give them access to material from the FTC proceeding until they would potentially obtain a preliminary injunction (and their motion for a PI was never adjudicated as a result of the dismissal).

Only one party "jumped" to provide material to them, and that one is Sony. To Microsoft's surprise, as Stephen Totilo of Axios noted on Twitter:

I, too, had noticed that paragraph in a recent case management statement, but wanted to wait and see how significant the information volunteered by Sony was. Now I believe that Stephen Totilo was on to something.

Sony has not just complied with a discovery request but gone beyond the proverbial call of duty. For instance, the new complaint incorporates charts provided by Sony. The charts themselves are redacted, but a separate filing indicates that Sony provided them (click on the image to enlarge):

The document is also stylistically distinct from the original complaint. There is a possibility of Sony's outside counsel having ghostwritten some or all of the new passages. I've also noticed that the font size has changed, which is not conclusive evidence but makes it a possibility that someone other than the author of the original document created the new one.

The "arguments" just echo Sony's, including stories that regulators have rejected.

The plot is thickening that Sony--which is desperate because it's apparently not going to find a regulator that wants to block the deal. It's possible that Sony is now--as a last resort, sort of a Hail Mary--hoping that those class-action lawyers in California can somehow prevent the acquisition from consummating.

Yes, this is speculative. But there are certain indicia.