DealLawyers.com Blog

When the FTC sued to enjoin Microsoft’s acquisition of Activision Blizzard (well-known for its popular Call of Duty video games), it argued that Microsoft would make the game exclusive to Xbox, diminishing competition with Sony’s PlayStation. In a May ruling in FTC v. Microsoft Corp., the Ninth Circuit affirmed the District Court’s denial of the FTC’s request to enjoin the merger, and the FTC subsequently dropped the related administrative litigation. Jody Boudreault of Baker Botts walks through the Ninth Circuit’s decision in an article for Bloomberg and offers suggestions for documenting and clearing vertical mergers subject to antitrust scrutiny, utilizing the dispositive factors outlined in the decision. 

For example, the Ninth Circuit considered whether Microsoft was incentivized to foreclose external sales. In finding that it was not, it cited the importance of PlayStation sales to Call of Duty’s success (2x that on Xbox) and the fact that Microsoft could suffer reputational harm by removing Call of Duty from PlayStation.

Given those two important factors cited by the Ninth Circuit, the article suggests:

– That parties to vertical mergers use “deal assessment materials and future projections” to “carefully document business strategies and realistic post-merger plans involving third-party sales” and

– That parties to vertical mergers develop evidence of potential reputational risks from post-closing anticompetitive behavior.

It makes numerous other recommendations based on the Ninth Circuit’s reasoning.

– Meredith Ervine