Tuesday, 11 July 2023 13:31

Judge Says that the FTC did not Show Potential for Harm in their Request for a Preliminary Injunction

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Reading time is around minutes.

It seems the Judge in the case involving the FTC, Microsoft and Activision Blizzard thinks that the FTC failed to reach a sufficient threshold to prove harm in a request for a preliminary injunction. To some this is cause for celebration although most people who have followed Microsoft’s history of anti-competitive behavior, in any market they play in, will know this is not a good thing. What makes this decision even more suspect is the fact that the judge precising over the case, U.S. District Judge Jacqueline Scott Corley, has a direct family member working at Microsoft.

The fact that the presiding Judge has a family member working at one of the involved parties should be a cause for recusal, however Judge Scott and the Northwest District of California did not seem to agree. Even after a letter was sent to them by the Revolving Door project. Considering the stakes here there was a real risk of retaliation on the part of Microsoft aimed at the Judge’s son. This would indicate that the reasoning and thought process behind the Judge’s decisions would likely be compromised. A similar issue arose in the Samsung V. Apple case with Judge Lucy Koh. She had previously worked for a legal firm that represented Apple in various capacities, which also made her reasoning and many unusual decisions during the trail suspect. The same is already happening here.

Some of the wording in the decision either shows a lack of understanding of the market that this deal impacts, or potentially a willful ignoring of the facts of the case and/or Microsoft’s own history.

“The FTC has not shown it is likely to succeed on its assertion the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets.”

This claim willfully ignores Microsoft’s history of acquisitions with the intent of making games exclusive. Bethesda, Zenimax, and others were open to both platforms before the purchase and then were closed off from other platforms after. It focuses instead on the logical fallacy of just Call of Duty and its place in the market. The decision on the part of the Judge to also ignore Microsoft’s presence in the PC market is suspect as well as they already have a large foothold there. Giving them Activision/Blizzard increased this and impacts other content services. The exclusion of Nintendo and the Switch, while odd, was not unexpected as the WiiU hurt the relationship between Nintendo and Activision Blizzard. Although it does ignore the fact that the current console and the Switch 2 are more capable of running Call of Duty and other games in the Activision Blizzard catalog.

Overall, the ruling, which is just on the preliminary injunction, does not take many existing and historical factors into account. The FTC is allowed to appeal this ruling and may still do it, but unless they get an emergency injunction (not likely at this stage) Microsoft and Activision can complete the purchase. There is still a full trial in August, but as that is after the completion of the purchase these typically do not go against the acquisition. If this goes through, I fully expect Microsoft to act exactly the way they always have. Much like Apple, when they cannot compete on the merits of the product, they either try to litigate their way to relevance or create an environment where they are the only option. The move might not be tomorrow, but it will happen.

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