A California federal judge appeared dubious Thursday of the Federal Trade Commission's bid to block Microsoft's $68.7 billion merger with Activision Blizzard Inc. during closings of a five-day hearing, criticizing the FTC expert's analysis and suggesting others could create a game rivaling Activision's Call of Duty.
The 20%:
Closing arguments began with Judge Corley focusing her questions on an estimate proposed by an FTC expert, Harvard University economics professor Robin Lee, who calculated that 20% of gamers would buy an Xbox in order to play Activision's wildly popular first-person shooter game Call of Duty if Microsoft makes the game exclusive to Xbox, foreclosing it from gaming console competitors like Sony, maker of PlayStation.
Judge Corley said Microsoft's expert witness, Elizabeth Bailey, a vice president at Charles River Associates, used "real-world data" regarding how many hours gamers play Call of Duty compared to other games, and the FTC expert didn't.
But the FTC attorneys disagreed, assuring the judge that their expert did indeed use "real-world data" by using game console sales to inform his analysis. Multiple FTC attorneys argued in defense of the expert's analysis, noting that Lee was attempting to predict future hypothetical trends if the merger were to occur and not current trends in the gaming industry.
Reputational Harm:
Throughout the hearing, the judge questioned various theories of the FTC's case, questioning why Lee didn't factor in reputational harm that could occur if Microsoft makes Call of Duty exclusive. Judge Corley also took issue with the fact that the FTC expert didn't consider whether consumers could boycott Call of Duty altogether if Microsoft makes it exclusive.
"You don't think a boycott is possible?" she asked the FTC. "I know it's beyond the evidence ... but that's something we see."
But the FTC counsel responded by arguing that reputational harm is not a factor typically considered in the antitrust analysis; it's a factor weighed in copyright law, which the judge acknowledged.
FTC attorneys also repeatedly told the judge that, according to antitrust law, the court must conduct a hypothetical monopolist test and, instead of examining the issues based on absolute terms proposed by Microsoft, should consider the probability that consumers might be harmed by the merger and thereby rule in the commission's favor.
The Devkits:
A Sony executive testified at trial that the proposed merger has forced the corporation to stop sharing its PlayStation developer data with Activision due to concerns the intellectual property will be leaked to Microsoft.
Judge Corley pointed out that Sony has chosen not to share its IP with Microsoft.
Why Call of Duty:
The judge also questioned why the FTC's case focused so closely on Activision's Call of Duty.
"Other games come and go, just like MySpace or TV shows or whatever, and I'm trying to figure out why … the emphasis on Call of Duty?" Judge Corley asked FTC attorney James H. Weingarten. "Isn't there an argument someone … else could come up with another game? Mr. [Bobby] Kotick, [Activision CEO], started from nothing, but he was able to do it."
Weingarten replied, "Content is key," and gamers want to play Call of Duty, which he noted is the No. 1 selling game each year.
The judge responded that not all gamers like Call of Duty and want to play it — a point she made throughout the hearing, citing Microsoft's survey data.
Weingarten acknowledged that there is a fraction of gamers who don't play Call of Duty, but he added that there are enough gamers who play the game "to make billions of dollars in revenue."
"Not everybody likes Coca-Cola, but if Coca-Cola and Pepsi merge, we would be here," Weingarten said.
FTC Faces Skeptical Judge As Microsoft Merger Hearing Ends - Law360
