Context: Last week, Administrative Law Judge (ALJ) D. Michael Chappell of the U.S. Federal Trade Commission (FTC) denied a motion by Microsoft to compel Sony Interactive Entertainment to come clean on how the PlayStation maker really views the 10-Year Call of Duty agreement it signed with Microsoft last summer. The decision was based on Microsoft having served a subpoena on Sony without first asking the ALJ to reopen discovery in the FTC v. Microsoft & Activision Blizzard adjudicative proceeding (an FTC in-house litigation) (previous article on this dispute).
What’s new: Just like games fray suggested in the article reference above, Microsoft has now indeed brought a motion to reopen discovery. It was filed on Tuesday (January 16) and appeared on the FTC’s public docket yesterday (January 17) (motion (PDF)). Microsoft is now only asking for the opportunity to join the Sony deposition about the 10-year CoD deal (scheduled for February 8) and the Ubisoft deposition about the cloud streaming divestiture that enabled UK clearance of the ABK merger (that deposition has not been formally scheduled, but may take place on January 31). The relationship between Microsoft and Sony is complicated by the fact that the PlayStation maker used a discovery request by the FTC to resume its campaign against the deal (December 23 article). The FTC’s litigation counsel is opposing Microsoft’s motion to reopen discovery on specious grounds (claiming that this would deprive the FTC of deposition time).
Direct impact: The ALJ will presumably grant the motion as it is clearly in the interest of justice and procedural fairness without prejudicing anyone. There will not be a level playing field even if the motion is granted, as Microsoft is now only asking to join the depositions, but is no longer requesting documents as there wouldn’t be enough time for that. What also reflects unfavorably on the FTC’s in-house proceedings is that the FTC’s litigation counsel (from whom the ALJ is independent, though both are employed by the same agency) opposes even the new motion.
- If the new motion is indeed granted (as game fray considers very likely), Microsoft’s lawyers will be able to counterbalance any questions asked by the FTC’s litigation counsel with questions of their own, which in Sony’s case would likely be intended to “impeach” a witness (i.e., call the credibility of testimony into question, such as by eliciting contradictions).
- Should the motion surprisingly be denied, it would reflect even more unfavorably than the fact that the FTC’s litigation counsel opposes the motion in a desperate attempt to deprive Microsoft of the benefits of a fair proceeding.
Wider ramifications: The FTC will not realistically be able to force Microsoft to divest ABK or any part thereof regardless of how this motion is resolved, and regardless of whatever Sony (and Ubisoft, though they’re not against the deal) may say. But from an institutional point of view, the FTC should be a little more concerned with its reputation and with the public perception of its in-house proceedings, which have been disparaged as a “kangaroo court” by some critics and viewed skeptically enough by the Supreme Court that a unanimous (9-0) ruling came down in the Axon case to faciliate constitutional challenges to those proceedings). Another aspect of reputation and public perception is that the FTC’s (not referring to the ALJ’s) conduct in the ABK context amounts to collusion not only with foreign regulators (though the FTC’s only powerful ally in this context, the UK Competition & Markets Authority (CMA), has meanwhile cleared the transaction) but also with a foreign company (article on FTC and Sony supporting each other) against two American companies that have meanwhile merged. Some of the questions the FTC’s litigation counsel asked Microsoft Gaming CEO Phil Spencer at a preliminary injunction hearing in federal court in June 2023 had listeners outraged, as the FTC’s questions might as well have been asked by lawyers trying to negotiate a better deal for Sony and on Sony’s behalf).
The denial of Microsoft’s motion to compel Sony to come clean on how it really views the deal by providing additional internal documents was based on a narrow interpretation of an order by the ALJ himself. Microsoft assumed, as a reasonable party would anywhere in the civilized world, that court proceedings are fair and symmetrical. That’s why Microsoft’s lawyers were operating under the assumption that an order granting a motion by the FTC to reopen discovery would also afford Microsoft the opportunity to take discovery on the same matter. But no. ALJ Chappell took the view that Microsoft would have had to bring its own motion to reopen discovery.
There is no firm trial date for the FTC’s in-house case against ABK. For now the plan is that it will take place 21 days after the United States Court of Appeals for the Ninth Circuit has decided an appeal that the FTC brought against a district court’s denial of a preliminary injunction last summer. Depending on counsel’s availability and other factors, it is quite possible that the FTC’s in-house trial will begin more than 21 days after the appellate decision, but it won’t happen before.
There is, however, a deposition date for Sony. The FTC’s lawyers will quiz a Sony witness on February 8. And the Ubisoft deposition (again, Ubisoft is not the problem here, as they are not campaigning against the deal) may take place on January 31.
Microsoft’s new motion is narrowly tailored: all those lawyers are asking for is to join those depositions and get the chance to ask their own questions. The motion to reopen discovery is meant to enable Microsoft to serve on Sony (where there is some controversy) and Ubisoft (which is not against the deal) what is called a subpoena ad testificandum: an invitation (of the kind that can’t be declined) to testify. Previously, the discovery dispute was over a subpoena duces tecum that Microsoft had served on Sony (and after which there is no question that Microsoft would also have joined the depositions). The difference is that Microsoft was previously requesting Sony-internal documents relating to how the company viewed the 10-year deal. While Sony’s executives will have been advised by their lawyers to be careful about what they communicate in writing, it’s possible that some internal documents would have been useful for Microsoft’s lawyers to see. The deal that Sony accepted in July 2023 had already been offered in December 2022, so there was a relatively long period during which people inside of Sony might have said things on email that would be relevant now.
But it would take too long now to obtain those documents as the depositions are already around the corner. That’s why Microsoft’s lawyers will now (provided that ALJ Chappel doesn’t deny the motion to reopen discovery) serve only a subpoena ad testificandum.
ALJ Chappell’s denial of the motion to compel Sony noted that Microsoft had not sought a reopening of discovery first, but did not say anything about whether that was still possible or whether the judge thinks it would be too late for that anyway. An order like that doesn’t have to address more than the motion to be immediately resolved, but judges have in similar situations pointed out at the same time that it would also be too late to take a procedural step now that wasn’t taken before.
It makes no sense for the FTC’s litigation counsel to oppose the motion, but they’re doing it anyway. That is just the latest in a series of questionable things that the FTC (not referring to the ALJ here) has done in its ill-conceived crusade against the deal. Whether it was the agency’s leadership that told litigation counsel to just do anything to potentially win, whether the FTC’s litigation counsel is obsessed with this case (they’d be antitrust rock stars if they achieved a divestiture here), or whether it’s a combination of both, the FTC is not acting responsibly, not in the interest of justice, not in the interest of competition, and not in the interest of the United States (neither its consumers nor its economy). It just looks bad. Really, really bad.
The FTC’s opposition brief should be filed soon (if it hasn’t already been) and become public. What Microsoft’s motion says about the FTC’s litigation counsel’s argument is that the FTC’s lawyers believe Microsoft just seeks to deprive them of deposition time. It is, however, obvious that Microsoft’s lawyers just want a level playing field, so they need time to task their own questions. Microsoft’s lawyers say they will use the time available to them (as opposed to merely blocking a window that the FTC could otherwise use), and “in an effort to obtain Complaint Counsel’s consent to the relief requested in this motion, Microsoft agreed to forfeit unused time (if any) to Complaint Counsel, despite no provision for such reversion in the Scheduling Order, and even though Microsoft is unaware of any precedent for such an offer.” But the FTC’s litigators rejected even that unprecedented and generous offer.
The FTC’s litigators are behaving like trolls. They’re not being constructive, and they don’t care about the reputational impact. Of course, litigation counsel has the job to win, but this is a government agency, not just a shady litigant trying to abuse a judicial process, and that’s why they should hold themselves, and be held by the ones they’re accountable to, to a decent standard. ALJ Chappell should not, and presumably will not, support such behavior that is as unprincipled as it is unreasonable, simply because there is no reason that anyone with a modicum of a sense of fairness would want to keep Microsoft’s lawyers out of the FTC’s Sony and Ubisoft depositions.