DealLawyers.com Blog

We’ve blogged quite a bit about the FTC & DOJ’s aggressive approach to merger enforcement and the agencies’ willingness to adopt novel theories in litigation.  That combination has led to several high-profile losses in federal court, but it’s been suggested that “winning by losing” is part of the strategy. However, a recent article in The Hollywood Reporter addressing consolidation in the entertainment industry suggests that the agencies’ recent losses in federal court may actually prompt a new wave of vertical mergers:

If Hollywood’s writers are hoping that new efforts by regulators can chill the sort of megadeal vertical mergers that have been gobbling up the entertainment landscape, they may be kept waiting. In fact, the government might be kick-starting a new round of M&A frenzy by losing major cases.

In July, a federal judge denied the FTC’s bid for a preliminary injunction to stop the Microsoft-Activision deal. U.S. District Judge Jacqueline Scott Corley found that Microsoft’s ownership of the Bobby Kotick-led company won’t suppress competition in the game library subscription and cloud gaming markets, underscoring evidence that the transaction may actually lead to more access to popular Activision titles. Going back to its failure to block AT&T’s purchase of Time Warner in 2019 and major deals by Meta and Change Healthcare in 2022, the government has lost every suit challenging a vertical purchase. (The DOJ’s win in blocking the sale of Paramount book publisher Simon & Schuster to Penguin Random House in October was a proposed horizontal merger among direct rivals, a more legally dicey prospect.)

“You only send a message if you win,” says Beth Wilkinson, the lead lawyer for Microsoft. “Now, they have such bad case law on vertical mergers that it’s almost impossible to stop a case like that.” The attorney adds, “I predict that acquisitions will go up in the next two quarters because companies are seeing that you can win against the FTC.”

By the way, if you don’t think I’m thrilled to be able to quote The Hollywood Reporter in this blog, you probably aren’t a regular reader of my stuff. Also, this particular item gives me a chance to note one of my own celebrity encounters – superstar lawyer Beth Wilkinson, who’s quoted in the last paragraph, was a year behind me in law school & was even known to share the occasional beer with our crew.

– John Jenkins