Lawyers for Microsoft have formally made the commitment to a U.S. federal judge that their client would not consummate the purchase of Activision Blizzard King (NASDAQ:ATVI) before March 31, 2023 at the very earliest, which must be attributable to the fact that competition regulators in several key jurisdictions have not yet cleared the transaction and that at least one of the necessary approvals is still going to be outstanding in late March.
In a recent court filing, Microsoft said the UK review deadline of April 26, 2023 was sufficient in its own right to ensure that the deal would not close before late April. But the fact that a competition authority has until a certain date to render a decision does not mean that it could not grant clearance anytime, especially if an agreement on specific commitments by the acquiring party paves the way for a consent decree. Microsoft's stipulation not to consummate the transaction before March 31 is, however, legally binding. In a totally hypothetical scenario in which all regulators would greenlight the deal tomorrow, Microsoft could go back to the court and ask for a new schedule under the changed circumstances, but that does not appear likely:
MLex reported yesterday that the European Commission will issue a Statement of Objections (SO) next week, and while they are talking about remedies, the EC won't grant clearance based on commitments by Microsoft until some time after the SO. MLex also believes that the UK Competition & Markets Authority (CMA) won't accept commitments before its provisional findings, which are slated for later this month or early February. So there are some procedural milestones between now and early February, including that Microsoft will have to respond to the SO and the provisional findings, and it takes time to formalize any commitments even after a philosophical agreement. In particular, competition authorities like to conduct a market test, meaning that they ask other market actors. In this case, Sony is the only vocal complainer, though it's actually complaining of its own business model and will increasingly find itself on the receiving end of public and private antitrust enforcement as a result of its opposition to Microsoft-ActivisionBlizzard. If Sony gave competition authorities negative feedback to any proposal, though a hard and fast 10-year license agreement would be tantamount to a structural remedy, the regulators would want to explain in a formal clearance decision why it was not reasonable for Sony to say no.
All of that takes time, and that's why Microsoft's lawyers apparently were in a position to tell the United States District Court for the Northern District of California that the deal foreseeably won't close before the last day of March. The deal has a formal deadline a few months later, which the parties could extend (but it would require some negotiation).
This is the procedural context of the "not before March 31" commitment:
Judge Jacqueline Scott Corley, who is based in San Francisco, held a hearing yesterday on Microsoft's motion to stay a so-called gamers' (more accurately, lawyers') lawsuit over the transaction. A dial-in option for the general public was not offerered, but will be available for the February 2 Status Conference in the same case.
In my commentary on the plaintiffs' opposition to the motion to stay, I mentioned the discretion that federal judges enjoy in such situations. It's not binary (grant or deny), but there is wide latitude in how to manage the case. Formally, the motion was denied, but practically, it has decelerated that private antitrust action--which just piggybacks on the FTC's in-house lawsuit--to a certain degree.
The motion for a preliminary injunction will be heard on March 23. Before the case was reassigned to Judge Corley, that motion hearing was scheduled for February 10. Upon reassignment, Judge Corley vacated that one and scheduled a case management conference for March 23. At that point I wrote:
"... I doubt that the PI hearing will be held on an earlier date than the initial case management conference (March 23). Maybe they'll both take place on the same day."
Bingo. The PI hearing has indeed been scheduled for March 23, 10 AM Pacific Time. By January 31, the parties must propose a briefing schedule for the PI motion (under the original one, Microsoft's opposition brief would have been due today, January 20), and briefing (including an optional but expected reply brief) must be completed by March 9, giving the court two weeks to read the briefs in advance of the March 23 PI hearing. After the hearing, the court then has a week to rule on the PI motion before the earliest possible closing date based on yesterday's stipulation--and it may actually have even more time if at least one of the prerequisite regulatory approvals is ensured to take longer. The question may very well come up at the PI hearing, and maybe Microsoft will then do the court the favor of stipulating to a slightly later date than March 31 based on what will be known by then about the regulatory proceedings in various jurisdictions.
In addition to a PI briefing schedule, the parties' January 31 filing will also have to outline a discovery plan. It will formally be a joint statement, but my guess is that they won't be able to agree on much more than the briefing schedule and will have divergent views on how and when to go about discovery.
The FTC has so far not seen a need to seek a PI. Its in-house adjudicative proceeding does not prevent the merger from closing.
This is the order on the motion to stay and the next deadlines and hearing dates:
Subsequently, court staff set a new deadline (for the Joint Status Report due by January 31) and a new Status Conference (February 2, 1:30 PM Pacific Time, to be held via Zoom). After that one, I'll update my timeline chart.
In the meantime we'll hear from Brussels (according to MLex) and possibly also London.
