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The Microsoft / Activision Blizzard acquisition |OT| Antitrust Simulator (completed; discussing post-merger issues)
- Thread starter Idas
- Start date
- OT
Nah it needs the Aaron Sorkin "The Social Network" treatment
OP
OP
We didn't have a lot of recaps for the first anniversary, but this one from CNBC was interesing:
It included a new interview with William Kovacic, former FTC Commissioner, about the case.
We also got a report from Benchmark (a research, sale, trading and investment banking firm) saying that the market is pricing in an 18% probability of deal success :s
On the other hand, I updated the next important dates (I mainly added the motion for the gamer's lawsuit):
- Late January 2023: Statement of objections from the EC.
- Late January /Early February 2023: provisional findings and remedies (if required) from the CMA.
- February 3rd 2023: decision from New Zealand.
- March 23rd 2023: motion for a preliminary injunction on the gamers' lawsuit.
- April 11th 2023: final decision from the EC.
- April 18th 2023: second extension of the original outside date. If MS quits by that date they have to pay a termination fee of $2,500,000,000; if they don't, the outside date gets extended until July 18th 2023.
- April 26th 2023: final report and remedies (if required) from the CMA.
- April - May 2023: decision from the SAMR in China.
- July 18th 2023: The end of the second extension and final outside date in the merger agreement. If MS quits by that date they have to pay a termination fee of $3,000,000,000; if they don't, they'll have to renegotiate the outside date with ABK.
- August 2nd 2023: beginning of the FTC in-house trial.
- Early 2024: decision from the FTC administrative law judge.
- Anything beyond that: unknown
Finally, pending questions!
Yes, only the CMA would post potential remedies to their concerns (if they don't block the deal, of course). The EC will share their concerns and then the parties are the ones who have to offer possible remedies to address them.
That's a very good question.
Since Brexit happened, everyone in M&A has been a little obsessed about the divergence ratio between the CMA and the EC. In other words, the risk of a different outcome when the CMA and EC are reviewing the same deal in parallel.
Back in 2020 the CMA said that a conflict was possible but should be "relatively rare". Right now I think that the divergence ratio is around 18-20% That's way more than relatively rare. :p
The first big divergence was the Facebook/Kustomer case, approved by the CMA in Phase 1 without remedies, approved by the EC during Phase 2 with (behavioural) remedies 🤷🏻♀️ The thing is that the CMA unconditionally cleared the deal in Phase 1 knowing that the EC had referred the deal to Phase 2 the month before, with very similar theories of harm, markets and facts (speculation at the time was that the CMA did it to avoid considering behavioural remedies).
Since then there have been more different outcomes, a famous one was the Cargotec/Konecranes in early 2022, approved by the EC with structural remedies, blocked by the CMA (rejecting the same remedy packed offered to the EC) 🤷🏻♀️
So, the logic is that the EC and CMA would cooperate and end up with a similar decision, but different outcomes are totally possible right now.
I still think that the CMA won't approve this case with behavioural remedies (although they make sense). But I see good arguments for the other three options:
1.- The EC has concerns and the CMA too. The EC will approve it with behavioural remedies but the CMA will only approve it with structural remedies, because those make more sense for vertical mergers.
2.- The EC has concerns and the CMA too. The EC will approve it with behavioural remedies but the CMA will block the deal following the arguments from Phase 1, the decision from the FTC and because this is Big Tech.
3.- The EC has concerns and the CMA has some too. The EC will approve it with behavioural remedies but the CMA will approve it without remedies according to their own precedents, because they think that the pro-competitive rationale for the deal (mobile, cheaper access to games, etc) would be lost if the deal were blocked and because MS has no incentive or ability to make the input (mainly COD) exclusive.
My crazy gut feeling still says number 3, but everything can happen :D
In any case, I think that the provisional findings will come after the SO from the EC. My guess is the week after this one, between January 30th and February 3rd (late January - early February) :p
The level of detail and timing. During informal talks you focus more on the What, during formal talks you also have to take into account the When or How, for example.
Yes, those informal talks should help MS to get a better idea of what could address the concerns from the EC.
Yes, fines would be part of it. But legal compliance (specially if you are a public company), reputation, government relationships, etc. would be affected too. If 1-2 big regions/countries are agains a merger it's better to abandon the deal and focus on something new.
The Open App Store Principles suggested that the platform fee for Xbox could get lower, I think.
Not critical but it's never bad.
Yes, I guess that the concept of the Universal App Store could open up the possibility of lowers fees on Xbox too. At least in the long run.
Yes, how the cloud gaming market issue is going to be resolved will be an interesting one
The rationale of the deal, why the acquisition was internally approved by MS.
Haha! No, he tries to come up with arguments for both scenarios but one side is weaker than the other.
They are looking for money through a possible class action lawsuit in the future.
In theory they are confidential (only for the parties), but through press reports I guess that we'll have more info.
I think that next week the SO from the EC and the week after the provisional findings from the CMA it's a possible scenario.
Yes, we should have a better understanding of their concerns and what could address them.
Yes and no. You don't know exactly what the regulator is thinking but from their requests and questions you can guess/feel their concerns and how convincing your answers and arguments are being.
Very unlikely, but the press should report something.
Haha! Thanks :) By the way, I read the article about the history of Atari, a good example of how dynamic (and unpredictable) the industry can be.
Thanks! :) Happy to help
Unlikely, specially in different jurisdictions.
Yes, you can be against the arguments from the FTC without being so harsh.
Yes, I did! It's definitively something that can happen and it's one of the side effects that third parties against a deal may suffer in future deals or investigations.
This MSFT-ATVI deal is an effort by the FTC to reset merger policy, says fmr. commissioner
William Kovacic, former FTC Commissioner, joins 'The Exchange' to discuss the labor union and political support behind Microsoft, the FTC's case around Microsoft and Activision and the antitrust impact of the acquisition.www.cnbc.com
It included a new interview with William Kovacic, former FTC Commissioner, about the case.
We also got a report from Benchmark (a research, sale, trading and investment banking firm) saying that the market is pricing in an 18% probability of deal success :s
On the other hand, I updated the next important dates (I mainly added the motion for the gamer's lawsuit):
- Late January 2023: Statement of objections from the EC.
- Late January /Early February 2023: provisional findings and remedies (if required) from the CMA.
- February 3rd 2023: decision from New Zealand.
- March 23rd 2023: motion for a preliminary injunction on the gamers' lawsuit.
- April 11th 2023: final decision from the EC.
- April 18th 2023: second extension of the original outside date. If MS quits by that date they have to pay a termination fee of $2,500,000,000; if they don't, the outside date gets extended until July 18th 2023.
- April 26th 2023: final report and remedies (if required) from the CMA.
- April - May 2023: decision from the SAMR in China.
- July 18th 2023: The end of the second extension and final outside date in the merger agreement. If MS quits by that date they have to pay a termination fee of $3,000,000,000; if they don't, they'll have to renegotiate the outside date with ABK.
- August 2nd 2023: beginning of the FTC in-house trial.
- Early 2024: decision from the FTC administrative law judge.
- Anything beyond that: unknown
Finally, pending questions!
Yes, only the CMA would post potential remedies to their concerns (if they don't block the deal, of course). The EC will share their concerns and then the parties are the ones who have to offer possible remedies to address them.
That's a very good question.
Since Brexit happened, everyone in M&A has been a little obsessed about the divergence ratio between the CMA and the EC. In other words, the risk of a different outcome when the CMA and EC are reviewing the same deal in parallel.
Back in 2020 the CMA said that a conflict was possible but should be "relatively rare". Right now I think that the divergence ratio is around 18-20% That's way more than relatively rare. :p
The first big divergence was the Facebook/Kustomer case, approved by the CMA in Phase 1 without remedies, approved by the EC during Phase 2 with (behavioural) remedies 🤷🏻♀️ The thing is that the CMA unconditionally cleared the deal in Phase 1 knowing that the EC had referred the deal to Phase 2 the month before, with very similar theories of harm, markets and facts (speculation at the time was that the CMA did it to avoid considering behavioural remedies).
Since then there have been more different outcomes, a famous one was the Cargotec/Konecranes in early 2022, approved by the EC with structural remedies, blocked by the CMA (rejecting the same remedy packed offered to the EC) 🤷🏻♀️
So, the logic is that the EC and CMA would cooperate and end up with a similar decision, but different outcomes are totally possible right now.
I still think that the CMA won't approve this case with behavioural remedies (although they make sense). But I see good arguments for the other three options:
1.- The EC has concerns and the CMA too. The EC will approve it with behavioural remedies but the CMA will only approve it with structural remedies, because those make more sense for vertical mergers.
2.- The EC has concerns and the CMA too. The EC will approve it with behavioural remedies but the CMA will block the deal following the arguments from Phase 1, the decision from the FTC and because this is Big Tech.
3.- The EC has concerns and the CMA has some too. The EC will approve it with behavioural remedies but the CMA will approve it without remedies according to their own precedents, because they think that the pro-competitive rationale for the deal (mobile, cheaper access to games, etc) would be lost if the deal were blocked and because MS has no incentive or ability to make the input (mainly COD) exclusive.
My crazy gut feeling still says number 3, but everything can happen :D
In any case, I think that the provisional findings will come after the SO from the EC. My guess is the week after this one, between January 30th and February 3rd (late January - early February) :p
The level of detail and timing. During informal talks you focus more on the What, during formal talks you also have to take into account the When or How, for example.
Yes, those informal talks should help MS to get a better idea of what could address the concerns from the EC.
Yes, fines would be part of it. But legal compliance (specially if you are a public company), reputation, government relationships, etc. would be affected too. If 1-2 big regions/countries are agains a merger it's better to abandon the deal and focus on something new.
The Open App Store Principles suggested that the platform fee for Xbox could get lower, I think.
Not critical but it's never bad.
Yes, I guess that the concept of the Universal App Store could open up the possibility of lowers fees on Xbox too. At least in the long run.
Yes, how the cloud gaming market issue is going to be resolved will be an interesting one
The rationale of the deal, why the acquisition was internally approved by MS.
Haha! No, he tries to come up with arguments for both scenarios but one side is weaker than the other.
They are looking for money through a possible class action lawsuit in the future.
In theory they are confidential (only for the parties), but through press reports I guess that we'll have more info.
I think that next week the SO from the EC and the week after the provisional findings from the CMA it's a possible scenario.
Yes, we should have a better understanding of their concerns and what could address them.
Yes and no. You don't know exactly what the regulator is thinking but from their requests and questions you can guess/feel their concerns and how convincing your answers and arguments are being.
Very unlikely, but the press should report something.
Haha! Thanks :) By the way, I read the article about the history of Atari, a good example of how dynamic (and unpredictable) the industry can be.
Thanks! :) Happy to help
Unlikely, specially in different jurisdictions.
Opinion | Hunter Biden and News Suppression
Only America has its hands over its eyes concerning certain actions of the FBI.www.wsj.com
Going by some of this dude's other articles I would want him to be negative on me as well. Dude seems pretty right wing.
Yes, you can be against the arguments from the FTC without being so harsh.
Idas I was wondering if you read this, and if so what you thought of it.
From the Unintended Consequences Dept.: Sony may live to regret the market definition and theory of harm in the Microsoft-ActivisionBlizzard merger context
As the saying goes, those who live in glass houses shouldn't throw stones. Sony is the only vocal complainer over Microsoft's purchase of A...www.fosspatents.com
Yes, I did! It's definitively something that can happen and it's one of the side effects that third parties against a deal may suffer in future deals or investigations.
Looks like the end of the month will create a better path for either the FTC or Microsoft depending on the Meta outcome.
Seems the market has gradually dropped in enthusiasm toward the deal passing as more and more info comes out.
Can someone post this article?
I really don't understand why MS doesn't walk away at this point, it seems impossible for it to go through.
Market predictions don't really mean anything. MS won't back out because the benefits of closing greatly outweigh the penalty of the deal falling through.
MS has a fair chance at getting through UK and Europe with remedies. If that happens the deal will close. There's no reason to back away before a ruling.
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It would depend on what the remedies are. MS isn't going to accept any and everything they come up with.
They won't just accept anything, but there's a fair chance that remedied will be agreeable.
Better to wait and see what they are than to just pull out of the deal prematurely
The market is going to lose confidence as it takes longer and longer which isn't really surprising. The release of the CMA's provisional findings will also cause the market to react. Anything positive towards MS getting the greenlight from the CMA will result in a surge in new investors in ABK looking at the arbitrage opportunity.
It's probably moreso the headlines than anything else. There have been misleading headlines about the FTC suing to block the ABK deal (they filed a complaint in their administrative court) and how the EU is planning to block the deal (they're going to publish a list of potential objections that Microsoft can negotiate).
In other words, clickbait drives a lot of the fluctuation these days because writers don't want to bother with nuance.
Microsoft will fight tooth and nail against the block because if they take it now they will effectively be dictated too on how to conduct business and no one in MS wants that
remedies they are fine with but having their hands tied behind their backs is something that may bring ruthless Microsoft back into being
The big thing people are discounting is that Microsoft as a company tends to rely on acquisition to fuel R&D, develop new product lines and stay competitive.
So given that we're seeing a situation where governments are trying to block acquisitions, It's far more likely that Microsoft will fight until the end since giving in early would have far more dire consequences for the company at large. Because if Microsoft can't acquire a company in an industry they are getting their asses handed to them in, they will never be allowed to acquire anything close to the products and industries that actually being home the vast majority of revenue for them.
And that's more dangerous for Microsoft than anything else.
So given that we're seeing a situation where governments are trying to block acquisitions, It's far more likely that Microsoft will fight until the end since giving in early would have far more dire consequences for the company at large. Because if Microsoft can't acquire a company in an industry they are getting their asses handed to them in, they will never be allowed to acquire anything close to the products and industries that actually being home the vast majority of revenue for them.
And that's more dangerous for Microsoft than anything else.
Microsoft have to pay 2billion if they walk away.
Think how many lawyers you can pay for that much
There FTC, in their attempted "reset" as essentially trying to completely rewrite the law on something. Law making is not their job. That is the role of the elected bodies in the US and, by by their interpretation, the judiciary.
Kovacic has basically admitted massive over reach here. An own goal that will get read out in court someday.
Kovacic has basically admitted massive over reach here. An own goal that will get read out in court someday.
That stripped down OT title, getting ready for the newest update to come.
Good or bad it has been a fucking ride
Take a look at Elizabeth Warrens proposed changes to anti-trust law and expansion of FTC powers.
IMO this case basically amounts to spending political capital in an effort to garner support for sweeping legislative changes. While I think the FTC arguments are complete nonsense- I now see clearly the value in taking this position, win lose or draw.
If they lose "see big tech has too much power, we need to change the law"
If they win "we averted certain disaster through atypical means, we need to change the law so that this never happens again"
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It depends on who you ask. If you go searching for content that leans towards no then that is the narrative you're creating. On the other hand when you see interviews from those who used to work at the FTC it sounds like it could go either way pending on what happens with the Meta deal and the union side of things.
If the CMA and EU approves I don't think Microsoft is waiting for the FTC to get their act together.
I was talking about the numbers. Like how it was given a 18% chance for approval in that article.
The GAMERS LAWSUIT might slow that down if the judge sees any merit in it.
I think the judge will see it as just gamers being gamers. Acting on emotions instead of facts.
The betting market is notoriously wrong all of the time. You should hang around election era next cycle.
That doesn't mean ABK is going to go through, but just that they aren't meritous.
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It's nice to see hoeg back in what ever capacity, Idas and Hoeg are what made this whole thing super entertaining, fun and crazy.
Next couple of weeks will be a joy.
Under FTC Rule of Practice 3.34(c), any motion to limit or quash a subpoena must be
filed within the earlier of ten days of service of the subpoena or the time for compliance
therewith. SIE states that it seeks an extension of time in order to continue its negotiations with
Microsoft regarding the subpoena, thereby narrowing potential discovery disputes.[\quote]
There is no injunction, so MS can close if CMA/EC decides its okay.
And that's exactly what MS' lawyer said they're going to do.
CMA .... do something
MS fixed it and sent it on the 17th but same deadline.
Sony asked for the deadline to be the 27th, MS agreed and so did the judge (it also seems like MS needed to give Sony 10 days to respond).
MS subpoena'd Sony on the 12th incorrectly (name/actual serving of it) with a deadline of the 20th (Sony has a right to respond in order to try and limit or quash the Subpoena(
MS fixed it and sent it on the 17th but same deadline.
Sony asked for the deadline to be the 27th, MS agreed and so did the judge (it also seems like MS needed to give Sony 10 days to respond).
It's just saying MS is waiting for the EC and the CMA's statements on the deal. They're expected to be released fairly soon
Nothing more - just that we're bracing for impact as the EC SO will be issued this week and the CMA provisional findings will probably be issued next week.
