Antitrust class action against Qualcomm (originally related to FTC action) thrown out on summary judgment; same judge previously denied discovery of my communications with Microsoft

In January, I reported on the partial dismissal of an antitrust class action against Qualcomm in the Northern District of California (a case that was brought in the wake of the FTC's ultimately unsuccessful enforcement action against the chipmaker), and at the time I already wrote that the ruins of that complaint "[would] hardly survive summary judgment." In February I agreed with Qualcomm's arguments for not reopening discovery, as did the court. After the SJ motion was filed in April, I "I guess[ed] Qualcomm's motion [would] succeed." And that is what has just happened.

On Tuesday, "[a]fter carefully considering the briefing and conducting oral argument on August 3, 2023," Judge Jacqueline Scott Corley of the United States District Court for the Northern District of California granted Qualcomm's motion for summary judgment in its entirety:

In Re: Qualcomm Antitrust Litigation (case no. 17-md-02773-JSC, N.D. Cal.): Order re: Motion for Summary Judgment (Public Redacted Version)

This here is a legal victory that should put all of that U.S. antitrust litigation from the late 2010s to rest (short of a successful appeal, but chances are so slim that I guess an appeal will not even be brought). In economic terms it is, however, pretty unimportant compared to the fact that Apple, due to its failure to make its own iPhone-grade baseband processor, had to extend the chipset purchasing agreement with Qualcomm by another three years (2024-2026), which presumably means that Apple exercised an option to extend its standard-essential patent royalty payments as well. In the alternative (if Apple had been able to replace Qualcomm's chips), Apple might have tried to renegotiate those SEP licensing terms.

Things are going well for Qualcomm, and ultimately I believe the company will be able to deal with whatever impact the proposed EU SEP Regulation--in whatever form it may or may not be passed into law--will have.

As for Judge Corley's reasoning, the key elements are that there was really not even the slightest substance to claims that an agreement with Samsung had any market foreclosure impact. And even with respect to Apple, there was no credible pass-through theory (of elevated costs). The final part ("Conclusion") of the order granting the motion to dismiss essentially says that the class-action lawyers made their strategic choices. The initial choices (very much about "No License, No Chips" and allegedly supra-FRAND SEP royalties) didn't work out when the Ninth Circuit reversed the FTC's trial win. Later on, they still tried to get something out of this by suing Qualcomm over exclusive dealing. They presented a new expert report "though the Court had expressly declined to reopen expert discovery." Judge Corley declined to "open the flood gates to prolonged do-over litigation" as opposed to the speedy, efficient, and just resolution that the Federal Rules of Civil Procedure seek to ensure.

This outcome makes sense to me. As I noted further above, I predicted that the shifting-sands case wouldn't make it to trial.

Class actions can serve useful purposes. They can raise issues and promote justice. However, the vast majority of class actions I see in the technology industry are just opportunistic attempts by lawyers to extract settlements from large corporations. Qualcomm probably could have "settled" that class action at a far lower cost than that of its world-class defense. But once you do that, others will come and sue you as well. Qualcomm made the right choice and has now (again, absent an unlikely reversal on appeal) defeated this class action (or, more precisely, consolidated set of class actions).

The order to dismiss the Qualcomm class action(s) came one day after Judge Corley also made a decision (in a class-action matter that does not involve Qualcomm but also followed an FTC action) relating in part to yours truly's communications with Microsoft:

DeMartini et al. v. Microsoft (case no. 22-cv-08991-JSC, N.D. Cal.): Order Re: Discovery Dispute Joint Letter

Let me just refer you to an article about this odd sideshow of the Microsoft-ActivisionBlizzard merger case by Stephen Totilo of Axios Gaming.

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Epic v. Google judge chides Google for unrepentance and lying about chat deletion, non-monetary sanctions TBD after April 7 discovery cutoff: implications for United States et al. v. Google

Two months after I wrote that "sanctions loom large" over Google's systematic deletion of chats about legally sensitive topics, that prediction and the fact that this blog has written about the topic more often than any other (non-paywalled) website--see the link list in this recent post--have been vindicated. Yesterday, Judge James Donato of the United States District Court for the Northern District of California, who is presiding over multiple consolidated Google Play Store antitrust cases (brought by Epic Games, three dozen state AGs, Match Group, and class-action plaintiffs), entered his findings of fact and conclusions of law, ordering monetary sanctions first (recovery of attorneys' fees) and announcing that non-monetary sanctions will be determined a little later:

In Re Google Play Store Antitrust Litigation (case no. 21-md-2981-JD, N.D. Cal.): Findings of Fact and Conclusions of Law re Chat Preservation

If this was about the actual merits of the case, that order would amount to

• an entry of liability (Judge Donato finds that Google is guilty of spoliation of evidence),

• a decision on a first minor remedy (recovery of fees, with the exact amount to be determined now), and

• a holding that a remedy of a certain category (at an abstract level, comparable to injunctive relief) is warranted, though more information is needed to make that determination.

• Furthermore, Judge Donato reiterated that a "terminating sanction" won't issue. So what the plaintiffs and Google know now is that there will be a non-monetary sanction that will have an impact on the adjudication of the case (unlike a fee award, which doesn't really matter between those parties), but it won't be fatal to Google's defenses. Comparing this again to a merits decision, it's like a judge saying that an injunction will issue, but it will have to be reasonably narrowly tailored.

Judge Donato notes that "[p]roportionality is the governing concept here." In order to have as solid a factual basis as possible for determining what remedy "fit[s] the wrong," he "would like to see the state of play of the evidence at the end of fact discovery." Fact discovery in this litigation was reopened after Epic and Match were allowed (in mid November 2022) to amend their complaints. As per a stipulation granted by Judge Donato, the cutoff date for that supplemental discovery is April 7 (next week's Friday). Thereafter, "plaintiffs will be better positioned to tell the Court what might have been lost in the Chat communications."

Proportionality must go both ways. Judge Donato "fully appreciates plaintiffs’ dilemma of trying to prove the contents of what Google has deleted." So the really tricky part is still ahead of the court and the parties. The remedy--some jury instruction--must not be disproportionate in terms of penalizing Google to an undeserved extent. At the same time, it would also be unfair if the absence of certain evidence that is totally due to Google's misconduct resulted in inconsequential sanctions.

I believe the minimum hurdle for Epic and its co-plaintiffs will be to show that Google employees likely discussed topics relevant to this particular antitrust litigation--such as "Project Hug" (see the previous link)--by chat. The hurdle for that should not be insurmountable.

The order rebukes the way in which Google has been dealing with this issue:

"Google clearly had different intentions with respect to Chat, but it did not reveal those intentions with candor or directness to the Court or counsel for plaintiffs. Instead, Google falsely assured the Court in a case management statement in October 2020 that it had 'taken appropriate steps to preserve all evidence relevant to the issues reasonably evident in this action,' without saying a word about Chats or its decision not to pause the 24-hour default deletion. [...] The Court has since had to spend a substantial amount of resources to get to the truth of the matter, including several hearings, a two-day evidentiary proceeding, and countless hours reviewing voluminous briefs. All the while, Google has tried to downplay the problem and displayed a dismissive attitude ill tuned to the gravity of its conduct. Its initial defense was that it had no 'ability to change default settings for individual custodians with respect to the chat history setting,' [...] but evidence at the hearing plainly established that this representation was not truthful."

In other words, Google's lawyers are liars according to the order. That's harsh, but it doesn't look like this is formally going to have an impact on the severity of the non-monetary sanctions to be ordered in the coming months. It is, however, the kind of stuff that will hurt Google when it appeals the decision, which I'm sure it will. Google even likes to appeal decisions prior to final judgment, and in another context but related to this litigation it succeeded to the extent that the United States Court of Appeals for the Ninth Circuit accepted to review a consumer class certification now. On that basis, Google has asked the court to postpone the trial in this litigation (PDF), and in a Twitter thread I agreed that Google had a point:

Google is not saying that the litigation as a whole should be put on hold; it's just about the trial. I consider the motion self-serving BUT reasonable.

Google is under pressure here because of the Google Chats issue involving even its CEO, see https://t.co/ceMJDvbLxG

🧵5/5

— Florian Mueller (@FOSSpatents) March 17, 2023

I want Epic and the other plaintiffs to prevail, and Google is not really concerned about litigation economics, but the fact that the Ninth Circuit is reviewing the class certification decision at this stage does warrant a postponement of the trial in my opinion.

Let's briefly also talk about what this means for the other Google antitrust litigation in which the same spoliation-of-evidence issue is now on the agenda: the first United States et al. v. Google case (in the District of Columbia). A little over a month ago, I commented on the DOJ's motion for sanctions. Meanwhile, Google has filed its opposition brief, which just like in the Northern District of California is the epitome of denial:

United States of America, et al., v. Google (case no. 1:20-cv-3010-APM, D.D.C.): Memorandum in Opposition to Plaintiffs' Motions for Sanctions

Meanwhile the DOJ and the plaintiff states have replied in support of their motion, but those documents are sealed for the time being. Anyway, I doubt that Google will be able to persuade Judge Amit P. Mehta to deny that motion in D.C. without an evidentiary hearing. The San Francisco decision isn't binding on him, but strongly suggests that there is an issue to be addressed.

Interestingly, some of the evidence of Google's systematic deletion of chats that the plaintiffs in the Northern District of California present is actually related to topics at issue in the D.C. litigation over Google's search engine monopoly, such as its revenue sharing agreements (RSAs). The last document I'll show you here was just filed a couple of days ago, and it's an unredacted version of a brief by Epic and its co-plaintiffs. I already published the redacted version in my most recent post on that California litigation, U.S. states, Epic Games, others accuse Google CEO Sundar Pichai of 'routinely opt[ing] to move ... to history-off [c]hats to hold sensitive conversations' in violation of retention obligations. The unredacted document makes it a little clearer what happened there, and the fact that Google's CEO himself sought to delete a message is quite interesting. Also, the unredacted material shows that Google employees were quite aware of what they were doing and why, and in at least one case someone even used a smiley, which is totally inappropriate when enaging in spoliation of evidence. Judge Donato apparently wanted that material to be made public first before issuing his order, given that his order makes even more sense against that backdrop. Here's the unredacted document with lots of exhibits:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD): Unredacted Version of PLaintiffs' Supplemental Brief on Google's Chat Production

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U.S. states, Epic Games, others accuse Google CEO Sundar Pichai of 'routinely opt[ing] to move ... to history-off [c]hats to hold sensitive conversations' in violation of retention obligations

Since the "Google Chats" discovery dispute started with a motion by dozens of state AGs, Epic Games, Match Group, and other plaintiffs in October 2022, it has made Google's behavior look worse as more information came to the light of day. The issue has also widened because the DOJ and the same state AGs as in the litigation that was originally started by Epic brought a motion for sanctions in the United States et al. v. Google antitrust litigation in the District of Columbia. Both cases are scheduled to go to trial later this year, and the plaintiffs are seeking trial-related sanctions as opposed to a slap on the wrist.

The latest filing by the plaintiffs in the Northern District of California takes the topic to a new level: Google CEO Sundar Pichai himself is being accused of playing a key role in this. Despite heavy redactions, the following passage is revelatory:

"The newly produced Chats reveal a company-wide culture of concealment coming from the very top, including CEO Sundar Pichai, who is a custodian in this case. In one Chat, Mr. Pichai began discussing a substantive topic, and then immediately wrote: '[REDACTED]' Then, nine seconds later, Mr. Pichai [REDACTED]. [...] When asked under oath [REDACTED]' (Id. Ex. 2, Pichai Dep. Tr. 195:7-12.)

"Like Mr. Pichai, other key Google employees, including those in leadership roles, routinely opted to move from history-on rooms to history-off Chats to hold sensitive conversations, even though they knew they were subject to legal holds. Indeed, they did so even when discussing topics they knew were covered by the litigation holds in order to avoid leaving a record that could be produced in litigation." (emphasis in original)

It's a safe assumption that the above passage tells the story of Mr. Pichai himself having moved a conversation from a history-on to a history-off chat. The first redaction likely means that he realized that the topic should not be discussed with history on, and what he did "nine seconds later" will either have been that he turned history off or that he opened a new chat with history off from the beginning.

This is the filing by Epic and its co-plaintiffs that was made a few hours ago in response to a court order:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-02981-JD, N.D. Cal.): Plaintiffs' Supplemental Brief on Google's Chat Production

Google was also ordered to make a statement, and unsurprisingly Google continues to deny any wrongdoing or prejudice:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-02981-JD, N.D. Cal.): Google's Supplemental Breif in Response to the Court's February 27, 2023 Minute Order

From the outside it appears very, very difficult to imagine that Google will get away with what it's done. The courts in California and D.C. will most likely feel forced to impose sanctions. Let us not underestimate how unpleasant this situation is for the two district judges:

• Google's systematic avoidance of discovery obligations cannot be tolerated, or draw only symbolic sanctions, without calling the whole system of pretrial discovery and retention obligations into question.

• Both cases--the Android app store antitrust case in San Francisco and the search engine monopoly maintenance case in Washington--are among the most important U.S. antitrust cases in history. Adverse inferences could make a major impact.

  It would obviously have been preferable for Google not to delete those chats, and then the cases could be decided strictly on the actual evidence. Now it's too late.

Nothing has happened yet about the sanctions motion in the District of Columbia. In California, Judge James Donato has gone to extreme lengths to establish the facts. The discovery dispute there is now getting to the point where a decision will come down.

I also have a brief update on a third Google antitrust case: the ad tech case that was filed in the Eastern District of Virginia in January. Google has requested that the case be transferred to the Southern District of New York, where a multidistrict litigation panel decided to consolidate various other ad tech cases (compared to which Google claims the DOJ's case adds nothing new, though it comes years after some others). Google acknowledges, however, that the DOJ's cases are immune to consolidation. It's just that Google sees no particular reason why that case should be litigated in the Eastern District of Virginia, and it argues that the DOJ's convenience (owing to geographic proximity) is not a major factor. Google may indeed win that venue transfer, given that there is a district judge in New York who's already very familiar with the issues.

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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

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Defeat for Sony as FTC judge largely rejects its motion to quash Microsoft's subpoena in Activision Blizzard merger case

The staff of the Federal Trade Commission (FTC) has just uploaded an order (PDF) by the agency's Chief (and only) Administrative Law Judge (ALJ) D. Michael Chappell dated February 23, 2023. The order addresses Sony's motion to quash or limit Microsoft's subpoena in the FTC's in-house adjudicative proceeding concerning the acquisition of Activision Blizzard King. For the most part it's a defeat for the PlayStation maker that makes it look absurd that Sony had accused Microsoft of "obvious harassment" (in the form of discovery requests):

• Sony's request to limit custodians (people whose documents must be produced) is denied even with respect to a Sony in-house antitrust counsel. Also, Sony had argued that searching a Japanese executive's files would be unduly burdensome because those documents are in Japanese, and that didn't persuade the judge either.

• Judge Chappell mentions that according to Sony, Microsoft would have been willing to drop one of those custodians from the list if the two parties had reached an agreement on the scope of discovery through negotiations. But in the absence of such an agreement, Judge Chappell decided that part against Sony. It's possible that not only in that respect but also in others, Sony could have obtained a better result through an agreement with Microsoft.

• Sony's requests to quash document requests are largely denied.

• The only somewhat meaningful win for Sony is that various of Microsoft's document requests are limited to the time period from January 1, 2019 to present (as opposed to the last ten years). However, that period should really be sufficient for Microsoft's lawyers to find material that strengthens their defenses (such as with respect to the importance of Call of Duty).

• Judge Chappell also granted Sony's request to quash document request 13, which related to performance reviews of Jim Ryan and those directly reporting to him. On Feburary 17 I already wrote about that one:

  Some narrowing of Microsoft's subpoena may happen. For example, Sony objects to Microsoft's request for access to performance reviews for the relevant Sony executives. While Microsoft is right that courts have decided that type of request in different ways, there is no guarantee that the FTC's Chief (and presently only) Administrative Law Judge (ALJ) D. Michael Chappell will require the production of such documents here.

  As you can see, I correctly identified the most ambitious discovery request at issue.

  It was in this context that Sony alleged "obvious harassment", but the fact that its motion as a whole largely failed shows that Sony exaggerated.

• A footnote mentions that Judge Chappell also denied Sony's motion for leave to file a reply brief in support of its motion. Judge Chappell did not see anything in the proposed reply brief that couldn't have been raised in the original motion.

Sony knows that its opposition to Microsoft's acquisition of Activision Blizzard King may--as I wrote in January--have unintended consequences.

In other news related to this merger, the European Commission has extended the deadline by another ten working days until April 25, 2023. As a result, decisions are now scheduled for the last week of April in three jurisdictions: the EU (25th), UK (26th), and New Zealand (28th). I've updated my timeline chart:

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Rumor of Sony having visited Microsoft to negotiate Call of Duty license, potentially paving way for clearance of Activision Blizzard purchase

[Update] I have been provided with hard evidence of a visit by Sony executives to Seattle on February 6. There is some debate now on Twitter over the purpose of the trip, with some pointing to the fact that Sony owns multiple game development studios in the area. [/Update]

With only a few days to go until the European Commission's Microsoft-ActivisionBlizzard merger hearing, Joost van Dreunen--an academic and entrepreneur specializing in video games says a source told him that "Sony’s corporate jet made a visit to Seattle last week for the first time in 18 months," presumably to hammer out a license agreement that would provide the PlayStation maker with access to Call of Duty for a long time after the consummation of the transaction.

A Twitter follower asked me for comment on that rumor, and this is how I responded:

"It's speculation. What might be the case is that some major regulators have indicated to Sony that they will clear the transaction if they find Sony isn't being constructive about working out a Call of Duty license deal. In that case, Sony might have decided to sit down and talk."

The claim is neither corroborated nor necessarily contradicted by a recent Microsoft filing with the in-house court of the U.S. Federal Trade Commission (FTC) that was made public yesterday (PDF). In that filing, Microsoft's lawyers say that "since announcing the deal, Microsoft has repeatedly offered to enter into an agreement to license Call of Duty to [Sony Interactive Entertainment]—first for five years and then for ten, an unheard-of duration in the industry." But "[Sony] has refused."

I tweeted about that:

New #Microsoft filing with #FTC says their original #CallofDuty license offer to #Sony had a five-year term, and was then extended to ten. #PlayStation #Xbox #Activision #ActivisionBlizzard $ATVI #antitrust #mergers #games

— Florian Mueller (@FOSSpatents) February 16, 2023

Sony once complained that Microsoft allegedly offered only a three-year deal. But we can rely on Microsoft's filing with the FTC, and we can reconcile the two numbers:

If Sony had another two years left under its existing Call of Duty license from Activision Blizzard, and Microsoft offered five years, then it would come down to an additional three years. However, from a commercial (and merger law) perspective, what matters is how much time a third party gets to adjust to the potential effects of a transaction.

Under the current deal with Activision Blizzard, there are some PlayStation-exclusive goodies. I would assume that if Sony wanted a new longer-term deal with Microsoft, that deal would replace the existing one with one that ensures total parity between the Call of Duty versions for Sony's market-leading PlayStation and Microsoft's Xbox. In other words, the present disparity in the PlayStation's favor would go away (which would be procompetitive), but Sony would get a longer-term contract.

Mr. van Dreunen's article that claims Sony and Microsoft may be close to a deal also speculates about a remedies package that would have two pillars: a long-term Call of Duty license as well as the divestiture of Blizzard Entertainment. But he is quick to note that this is inconsistent with the positions taken by the UK Competition & Markets Authority (CMA), which--apart from the fact that it does not categorically rule out a license-based solution--did not focus on a divestiture of Blizzard. The narrowest divestiture that the CMA has in mind would relate to Call of Duty; the next option would be all of Activision (which makes CoD, but also other games); and the furthest-reaching one would involve Activision and Blizzard, but not King (Candy Crush).

Let me put it this way: I find Mr. van Dreunen's claim about Sony having visited Microsoft far more interesting than his musings about that remedies package. As an app developer, I believe Blizzard's franchises would contribute very significantly to the appeal of the universal app store Microsoft plans to create.

Let me share a few observations on the FTC discovery process:

• The Microsoft filing I mentioned further above (PDF) responds to Sony's motion to quash or limit Microsoft's subpoena. Sony accused Microsoft of "harassment", but Microsoft explains in its opposition brief why it believes its discovery requests are reasonable. One item that appears undoubtedly justified to me is that Microsoft wants to see documents from the person(s) who managed Sony's partnership with Activision Blizzard prior to the one currently in charge (Christian Svensson, who "has only been in this position since 2021"). I don't think Sony can reasonably argue that communications regarding the Activision Blizzard partnership in 2020 and before are irrelevant. Some narrowing of Microsoft's subpoena may happen. For example, Sony objects to Microsoft's request for access to performance reviews for the relevant Sony executives. While Microsoft is right that courts have decided that type of request in different ways, there is no guarantee that the FTC's Chief (and presently only) Administrative Law Judge (ALJ) D. Michael Chappell will require the production of such documents here.

  Microsoft's opposition to Sony's motion to quash or limit calls the FTC's "High-Performance Console" market definition "gerrymandered"--as did I in my commentary the FTC's decision to bring an in-house lawsuit and Activision Blizzard in its response to the FTC's complaint. It really is the term that comes to mind. By the way, the CMA does not exclude Nintendo from the relevant console market, but takes into account in its analysis of competitive dynamics that there are some differences between the Switch on the one hand and the PlayStation and Xbox on the other hand. The CMA's approach is intellectually honest so long as the net effect isn't the same as defining the market too narrowly.

• Another filing that came to light yesterday is a Sony motion for an extension of time to bring a potential motion to quash or limit the FTC's subpoena (PDF). Sony previously agreed with the FTC's counsel on a two-week extension, and now agreed on another one of the same length (until March 1).

  What's a good sign is that Sony says in the motion it "has begun productions [of some but not all of the requested documents] to Complaint Counsel [i.e., the FTC] and to Respondent [i.e., Microsoft]."

  What I find a bit odd is that the FTC is being so generous with a second extension, given that the first one was already quite long. I wrote the following on Twitter:

  #FTC served subpoena on #Sony 1/20, gave until 2/1 to respond; Sony got first extension until 2/15, now *another* until 3/1. Discovery cutoff is 4/7. Sony has started providing documents (see tweet below), but on SOME items the FTC is wasting > half of the discovery period... https://t.co/j1X7DgPFqX

  — Florian Mueller (@FOSSpatents) February 17, 2023

What made some news this week is FTC commissioner Christine Wilson's announcement of her resignation, and the rather partisan reactions, with some Republicans blaming FTC chair Lina Khan and some Democrats (including what is indicated between the lines in the Democratic commissioners' reaction) accusing her of having been a pain in the neck. Mrs. Wilson keynoted a Concurrences webinar at which I spoke last year, and I agree with her dissent from the FTC's Microsoft-ActivisionBlizzard complaint. I regret the partisanship on both sides that I have seen this week. I'd like the FTC to vigorously enforce the antitrust laws against abusive Big Tech companies to a greater extent than Mrs. Wilson would presumably support, and in general that also includes merger reviews (where some mistakes were clearly made in the past, not only by the FTC but also other regulators). It's just that the FTC is currently ruining its reputation, such as with the absurd positions it's taking in the Microsoft-ActivisionBlizzard context. It also doesn't make the FTC look good that Meta has meanwhile closed its acquisition of VR fitness company Within. As I have previously said, the issues in that case, which the FTC lost (in the sense that its motion for a preliminary injunction was denied), are distinct from the ones in Microsoft-ActivisionBlizzard, but the FTC is losing credibility at a worrying pace.

In other Microsoft-ActivisionBlizzard news, the UK CMA published its "Summary of third party calls" (PDF). They spoke with six (unnamed) third parties, three of which raised some concerns. It's easy to figure, just based on what has been reported in the media before, that the three critics are Sony, Google, and to a lesser degree, Nvidia (which is just interested in some kind of license, but not opposing the deal as a whole). I tweeted about that, too:

Today the UK CMA published its summary of calls with 6 third parties re. #Microsoft-#ActivisionBlizzard (https://t.co/jxpuB2PVAR). Three of them voiced concerns -- they must be #Sony, #Google, #Nvidia. Just self-serving.#antitrust #mergers #Xbox #PlayStation $ATVI

— Florian Mueller (@FOSSpatents) February 16, 2023

There is nothing revelatory or otherwise surprising in the CMA's summary of those calls.

Finally, let me update my timeline chart once again. I've checked on the docket of that so-called gamers' (actually lawyers') lawsuit in the Northern District of California, and the briefing process concerning the protective order has been terminated after a stipulation by the parties; also, the deadlines for the briefing on Microsoft's motion to dismiss have been adjusted based on an agreement between the parties. The class-action lawyers have to file their opposition to the motion to dismiss today (Friday), and Microsoft will reply a week later. I've also added the deadline for Microsoft's opposition to the motion for a preliminary injunction, and done some general cleanup. Here's the updated chart (click on the image to enlarge):

Here's a table of the key acronyms:

N.D. Cal.	United States District Court for the Northern District of California
PI	preliminary injunction
FTC	(United States) Federal Trade Commission
CMA	(UK) Competition & Markets Authority
DG COMP	(European Commission's) Directorate General for Competition
NZ ComCom	Commerce Commission of New Zealand

Note that all of this is in flux and some of those events may not (have to) happen. For instance, if the motion to dismiss is granted in California, even if only in part, this may have implications for the preliminary injunction (possibly even obviating any PI hearing).

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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:

Well, the information on the judge having granted the request for an extension is NOT reliable. The judge granted a DIFFERENT extension. A decision on that particular motion for a 4th extension has NOT been published yet. I believe we will see that decision later today.

— Florian Mueller (@FOSSpatents) February 6, 2023

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):

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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

We're now witnessing the first legal--albeit only procedural--dispute between Sony and Microsoft in connection with the latter's acquisition of Activision Blizzard King (NASDAQ:ATVI). After bringing three motions for an extension of time (related to a potential Sony motion to quash or limit Microsoft's subpoena) that Microsoft was fine with, Sony has now filed a fourth such motion (PDF), and Microsoft officially opposes it, which requires the Federal Trade Commission's Administrative Law Judge (ALJ) D. Michael Chappell to side with one party or the other.

Sony also has a problem with the FTC's own discovery request, which I find odd given that no one urged the FTC to start this in-house adjudicative proceeding as vehemently as Sony did.

Sony's lead counsel in the FTC's Microsoft-ActivisionBlizzard proceedings is Cleary Gottlieb's Bruce Hoffman. In my previous post (which compares the FTC's failed attempt to prevent Meta from acquiring VR startup Within to the Microsoft-ActivisionBlizzard case), I noted that this lawyer--who also represented Sony as a complainer over the Meta-Within deal--encouraged the FTC, via Bloomberg Law, to just keep on losing.

Mr. Hoffman filed his fourth motion for an extension of time on Thursday, and the FTC published it on Friday (the day on which the previous deadline expired). He asked for an extension until next Friday (February 10), and on Monday we'll see whether ALJ Chappell granted it. At some point Sony must know whether to fish or cut bait.

The motion is a strange. Significant parts of it are actually the stuff that belongs into a motion to quash or limit: it's mostly about why certain discovery requests made by Microsoft are deemed overreaching by Sony. But all that Sony is seeking right now is an extension of time, and after getting three extensions, it can hardly make the case that a fourth extension is reasonable. And Sony doesn't even rule out that it may seek a fifth extension ("[Sony Interactive Entertainment] anticipates that this will be its last request for an extension" (emphasis added)).

Sony complains that Microsoft didn't just agree on a single multi-week extension. But Microsoft has no obligation to waive its rights to oppose any Sony motion.

While I found the motion a bit tiresome to read, there are some tidbits in it that I'd like to share here:

• Sony made a counterproposal to Microsoft, specifying what documents Sony is prepared to provide. The motion states that it "will cost approximately $2 million or more in fees and expenses and demand weeks of intense work and substantial efforts and involvement of [Sony Interactive Entertainment] personnel" just for Sony to make the productions it is willing to make. A sworn declaration is attached to the motion and says "[Sony Interactive Entertainment] would incur approximately $2 million or more in legal and related costs in connection with harvesting, processing, TAR [Technology Assisted Review] modeling, reviewing, and producing the documents."

• Given that Sony's motion suggests it would be hugely more time-consuming to respond to Microsoft's actual discovery request, one can infer from all of this that Sony wants the judge to believe that it would cost many millions of dollars to comply.

• Sony complains that Microsoft wants to see, inter alia, "executed copies of every content licensing agreement [Sony Interactive Entertainment] has entered into with any third-party publisher over the past 11 years." Frankly, I can't see why that is an unreasonable request. Sony will have a database of all those agreements, and given that Sony's own strategy is heavily content-centric, that discovery request seems par for the course to me. Those agreements will contain certain exclusivity arrangements that are relevant to the case (exclusive third-party titles, PlayStation-exclusive features, etc.).

Sony has been subpoenaed not only by the FTC and Microsoft, but also by class-action lawyers in the Northern District of California. In that case, Sony may soon bring a motion to quash or limit as the court only stayed depositions of Microsoft executives.

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Thankless Sony is unwilling to comply with Federal Trade Commission's subpoena over Microsoft-ActivisionBlizzard merger, at least in its original form

This is counterintuitive. One would think that Sony's PlayStation chief Jim Ryan has a Lina Khan poster above his bed because the Federal Trade Commission (FTC) is doing him the favor of acting almost like a wholly-owned subsidiary of Sony Interactive Entertainment with respect to Microsoft's acquisition of Activision Blizzard King (NASDAQ:ATVI). At minimum, one would expect Sony to jump when the FTC asks for documents and testimony in connection with that merger case. Not so:

On Wednesday, Sony filed a motion--which it says the FTC does not oppose--for an extension of time (PDF). Instead of meeting the production date for documents requested by the FTC, which was supposed to be February 10, the PlayStation maker wants to have until February 15 "to move to limit or quash or otherwise respond to the subpoena served on [Sony Interactive Entertainment] by the United States of America Federal Trade Commission."

Let that sink in:

This is the same Sony that has been telling the FTC (and other regulators) that the transaction has to be blocked "because Call of Duty." They're the only vocal complainer. The FTC brought that in-house lawsuit, which is exactly what Sony wanted, and served a subpoena on Sony (which according to the motion happened on January 20). That is possibly the first thing that the FTC has done in this entire context that a Sony subsidiary would not have done.

Instead of hearing the proverbial call of duty and readily handing over all the documents requested by the government agency, Sony is now negotiating the scope of discovery and reserving its right to "move to limit or quash" the FTC's subpoena. That's not being cooperative...

In a way I anticipated the obvious: Sony doesn't like to find itself on the receiving end of discovery requests because its own content-centric business strategy and dealings with game makers would have to be debated in public--the very practices that Sony engages in like no one else and accuses Microsoft of planning to engage in with respect to Call of Duty. Therefore, it came as no surprise that Sony took issue with Microsoft's subpoena. It had a deadline yesterday to move to limit or quash that one, but the FTC sometimes has a delay or one or more days before a document gets uploaded, so I don't know whether Sony and Microsoft worked it out. Anyway, both Sony and Microsoft are private parties, and disagreements between them are one thing, but being uncooperative when a government agency requests material in a case that it brought because of Sony's constant complaining is another.

What I find really puzzling is that Sony not only reserves the right to limit the subpoena but even to "quash" it in its entirety. Sony may refuse to cooperate at all.

Sony can't claim that somebody is dragging it into that merger case because Sony instigated it all and is even playing fast and loose with the truth.

The FTC and other competition enforcers (for example, the European Commission issued a Statement of Objections) can see now that Sony wants to have its cake and eat it. It wants government agencies to do the job of delaying (or, preferably from Sony's perspective, derailing) a transaction--but it doesn't want to make its contribution by putting all relevant facts on the table. Sony may be afraid of some of its own practices giving rise to competition enforcement--and of being exposed as a hypocrite, which is bad enough in its own right.

The FTC may, however, be more concerned now about its own reputation. It just suffered a major defeat as a federal judge declined to extend a temporary restraining order against Meta over its acquisition of Within (I'm waiting for the public version of the order so I can comment more specifically). The FTC's track record under Chair Khan is not looking good. Will the agency ever get tired of losing?

As long as those merger cases (the one in the FTC's in-house court and the one in the Northern District of California) are pending, Sony and others have to expect that some of their strategies and practices will be discussed in public. Nvidia is in talks with Activision Blizzard over the scope of the latter's discovery request. Nvidia is not nearly as aggressive as Sony, but it appears to be opportunistically seeking a license it doesn't have and wouldn't otherwise get.

The FTC's in-house lawsuit has spawned a class-action-style (more action than class) case in the Northern District of California, the district in which the FTC just lost against Meta. Those San Francisco proceedings will be even more public unless the complaint gets dismissed. The class-action lawyers who brought it would like Sony's Jim Ryan, Nintendo's Doug Bowser, and Activision Blizzard's Bobby Kotick to testify (and have subpoenaed those three)--in addition to, of course, Microsoft's leadership. Games Radar picked up this story, too (The console war reaches new heights as random gamers ask Sony and Nintendo CEOs to testify over Microsoft Activision deal). Sony's lawyers may already be preparing the next "motion to limit or quash."

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Nvidia has been subpoenaed by Activision Blizzard in FTC case, hopes to resolve disagreements over scope of discovery until February 13

Yesterday I reported that counsel for Nvidia entered an appearance in the FTC's in-house adjudicative proceeding, and the question was "whether those lawyers are going to try to support the FTC or whether the reason is just a discovery dispute." For now, there are no motions to intervene in accordance with 16 CFR § 3.14, but Nvidia's lawyers filed a motion on Monday that the PDF has made public now (PDF), seeking an extension until February 13 to move to limit or quash a subpoena served on Nvidia by Activision Blizzard on January 20. The motion says that Activision agrees to this extension of time.

Earlier today I reported on subpoenas served on Sony's PlayStation chief Jim Ryan, Nintendo of America CEO Doug Bowser, and Activision Blizzard CEO Bobby Kotick by class-action lawyers suing Microsoft over this deal in the Northern District of California. If Sony wants to bring a motion to limit or quash Microsoft's subpoena in the FTC case, it has to do so today and then we'll probably find about it tomorrow.

In other Microsoft-ActivisionBlizzard news, Politico now also reports on the Statement of Objections (SO) that the European Commission has sent to Microsoft over the transaction:

🚨The European Union has issued Microsoft with a formal antitrust warning over its $69 billion swoop for Activision-Blizzard. A statement of objections was sent to the U.S. tech giant over the record-breaking deal yesterday. Read more ($): https://t.co/mcpMBMFnEl

— Samuel Stolton (@SamuelStolton) February 1, 2023

I've already commented on the news of the SO (which was widely expected).

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States, Epic Games, Match Group show smoking guns for Google's spoliation of evidence by moving sensitive talks to 'history off' chats: sanctions loom large

The Tuesday (January 31) hearing related to Google's auto-deletion of chats (as part of the Google Play Store Antitrust Litigation in the Northern District of California) is hardly going to be pretty for Google. I've commented on that sanctions process a few times, most recently on Wednesday (in that post you also find links to my previous articles on that issue), and sometimes it feels like I'm the only one to follow the process in granular detail. But once the court slaps Google with sanctions--which is quite a possibility now--the topic may draw considerably more attention.

Shortly before midnight local time on Friday, the two sides filed their responsive post-evidentiary-hearing briefs. You can find them at the end of this post.

The plaintiffs are going for the jugular by asking for punitive sanctions. But that doesn't mean they're wrong: it's a problem of Google's own making. I must say that some of the evidence referenced in and attached to their latest filing strongly suggests both that Google had a culpable state of mind and that the plaintiffs were indeed prejudiced. Should the plaintiffs' position be overreaching, than only to a gradual extent as far as I can see based on the evidence that has been put out in the open.

Google's argument comes down to saying that there are millions of documents--enough to build a case on--and that even if anything relevant was said in those Google-internal chats, it wouldn't add anything new. Well, with a view to both the "culpable state of mind" and extent-of-prejudice questions, there's some pretty damning evidence of Google systematically discussing sensitive issues in non-saved chats. This is evidence that Judge James Donato may not take lightly. It shows that Google just gives lip service to the preservation of evidence by pointing to its encouragement of using chat history or of saving key messages on email: as the plaintiffs note, it's just not realistic that busy managers will be able to make a determination on whether a chat is or is not relevant to a huge and complex case. The only solution is to save everything and have discovery attorneys take a look. But that's what Google wanted to prevent from happening:

• In a 2018 document, Google discussed "smart replies", meaning that a chat system proposes likely answers; for instance, if someone proposes a meeting, the system may offer such choices as "works for me". In that context, the assumption is stated that if the preservation of a chat's history is turned off, the content may be sensitive (click on the image to enlarge):

  

  "The assumption is that users often turn History off to discuss sensitive topics." And it's anybody's reasonable assumption that a Googler wouldn't have written this is if it wasn't Google's own policy. Indeed, Google's "Communicate with Care" guidelines for employees say that having off-the-record charts is "[b]etter than sending the email [about the same thing], but not without risk."

• The plaintiffs point to a hearing exhibit according to which there were Google-internal instructions that "anything sensitive" should be "move[d] to Chat/video call."

• Then there's a document in the evidentiary record where an employee deleted a passage from a Google executive's talking points (concerning some other gaming platform) and wrote:

  "Since it’s a sensitive topic, I prefer to discuss offline or over hangout." (Hangout was one of Google's chat systems, though it could also be used for screen sharing, voice calls, and video conferences.)

• My favorite smoking gun here is that a Google executive (Larry Yang, who was in charge of Fitbit at some point) made the specific distinction between saved and unsaved chats in connection with legal matters (click on the image to enlarge):

  

• What's similar in nature and even specifically related to Epic's lawsuit is a warning by one Google exec to his colleagues that on-the-record chats "remain in perpetuity" (click on the image to enlarge; I added the arrow that points to the critical passage):

  

It seems that Googlers don't always communicate with care about their company's Communicate with Care program...

My primary concern is that Google's "Project Hug"--an effort that resulted in various anticompetitive agreements with the likes of Activision Blizzard and Riot Games, ensuring their loyalty to the Google Play Store--is portrayed by Google as just some kind of customer loyalty program involving other services such as the Google Cloud Platform and YouTube, but I have no doubt that the driving motivation was to ensure all major mobile games but Fortnite would remain on the Google Play Store, and some of the automatically deleted chats probably contained smoking guns to that effect. And that's a key issue: Epic and Match amended their complaint (for Epic, it was even the second amendment) to allege a per se violation of Sherman Act Section 1 through those contracts.

Based on what has been put forward--which is only a subset of what the plaintiffs were able to present to Judge Donato--it seems to me that Google is guilty as charged.

Finally, the briefs with all of the (public) attachments:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD, N.D. Cal.): Plaintiffs' Response to Google's Brief in Response to the Court's Minute Order Questions Regarding Preservation of Chat Messages

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD, N.D. Cal.): Defendants' Reply to Plaintiffs' Responses to Minute Order Questions

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36 states, Epic Games, Match Group allege Google had 'culpable state of mind' when auto-deleting relevant Google-internal chat messages: Google obviously denies

It's getting really serious now in the Google Chats discovery dispute that is part of the Google Play Store antitrust litigation in the Northern District of California (the plaintiffs are Epic Games, Match Group (Tinder), three dozen state AGs, and some consumer class-action plaintiffs). For a recap:

• 36 U.S. states, Epic Games, and consumer plaintiffs seek sanctions against Google for not preserving any relevant Google Chats: by default, all Google Chats are permanently deleted every 24 hours

• U.S. states, Epic Games, other plaintiffs reinforce motion for discovery sanctions against Google over systematic deletion of chats

• U.S. states, Epic Games, Match Group, consumers get evidentiary hearing over Google's systematic deletion of company-internal chats: Northern District of California, mid January

• Google faces two big U.S. antitrust trials in the fall; Epic Games, Match Group, state AGs suggest Google wants to push jury deliberations in Google Play Store case into Thanksgiving

The following screenshot shows the first part of the Google-internal policy at issue (Google Chat Retention Policy; click on the image to enlarge):

Judge James Donato approved the parties' proposed briefing schedule for the Google Chats discovery dispute. The two post-evidentiary-hearing briefs, answering specific questions about what to make of the evidence and what remedies to potentially impose, were due yesterday (Tuesday, January 24). By coincidence, that was the day the United States Department of Justice and eight state AGs filed a second Unite States et al. v. Google antitrust lawsuit (in that case, over ad tech), so some governmental plaintiffs dealt Google two blows on the same day.

Either side is allowed to file a response on Friday (January 27), and the next hearing over the issue will be held on Tuesday (January 31).

Given that there will be another round of briefing, it may be a bit early to predict the outcome, but I'll share my observations based on what I've read so far and what I infer from the court's case management decisions:

I doubt that Judge Donato will ultimately have no problems with Google's conduct. The company argues that it produced millions of documents and seeks to downplay the importance of what was not preserved, but it apparently can't deny the most important allegations the diverse group of plaintiffs has made.

It looks to me like this is now mostly about two questions:

• The Latin term for the first question--whether Google acted with a culpable state of mind--is mens rea, but this here is not a criminal case. The plaintiffs jointly (which is rather meaningful) take the firm position that Google did act with a culpable state of mind. It did mean to deprive the plaintiffs of relevant evidence. Google disputes this and suggests that it had other reasons for auto-deleting internal chats, and points to long-standing practice.

• If Google is held responsible, what should the consequences be?

  • The plaintiffs ask the court to instruct the jury that it's not going to see all the evidence that is relevant, and "should infer that Chat messages destroyed by Google would have been unfavorable to Google in this case."

  • Google says there wasn't really much prejudice (if any) to plaintiffs, and the remedy must be proportionate. It proposes--without actually submitting a specific wording--a "neutral" instruction. Google would then like to present evidence about the chat issue in hopes of persuading the jury that it acted diligently and correctly--and would then like to leave it to the jury to draw whatever conclusions from this mess.

There is no question that what the plaintiffs propose would substantially up the ante for Google in the jury trial in the fall. It's not like a "terminating sanction" that ends the debate: the jury is going to hear and see plenty of other evidence, and won't necessarily assume that the deleted chats prove everything wrong that Google says. But there are contexts in which an adverse inference instruction could tip the scales, such as the question of whether Google's "Project Hug" was about maintaining its Android app distribution monopoly through anticompetitive agreements with the likes of Activision Blizzard King. Some court filings related to Epic Games and Match Group's motion to amend the complaint referred to some evidence that "Project Hug" was about the Google Play Store more than anything else, and triggered by fear of Epic-style defections; I'll talk about that in another post one of these days. Now, if the jury additionally has to assume that Google executives may have said in internal chats that it was all about maintaining the Android app distribution monopoly, that would pave the way for a finding of a per se violation of Sherman Act Section 1. That's just one (but rather important) example.

Was Google's systematic deletion of chat messages so outrageous as to justify such punishment? Let's see what the responsive filings say before the weekend. In another disovery dispute (over a less problematic issue, though), Google came away unscathed in the District of Columbia last year.

I remember at least one mandamus petition by Google ahead of a major trial in the Northern District of California, and wouldn't be surprised if Google immediately appealed an adverse inference instruction to the Ninth Circuit (though appeals courts generally prefer to hear appeals of final judgments, which is why in 2020 the Federal Circuit rejected a mandamus petition over such sanctions), but we're not there yet.

Here are the two post-evidentiary-hearing briefs with all the (public) exhibits:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD, N.D. Cal.): Plaintiffs' Responses to Minute Order Questions

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD, N.D. Cal.): Defendants' Brief in Response to the Court's Questions Regarding Preservation of Chat Messages

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