WEBVTT - FTC Tries to Stop Meta From Buying VR Startup 0:00:03.160 --> 0:00:07.960 This is Bloomberg Law with June Brusso from Bloomberg Radio 0:00:10.280 --> 0:00:13.480 to reflect who we are and what we hope to build. 0:00:14.200 --> 0:00:18.000 I am proud to announce that starting today our company 0:00:18.040 --> 0:00:23.560 is now Meta. Our mission remains the same. It's still 0:00:23.600 --> 0:00:27.680 about bringing people together our apps and their brands. They're 0:00:27.720 --> 0:00:31.120 not changing either, and we are still the company the 0:00:31.200 --> 0:00:36.080 designs technology around people. Facebook may have changed its name, 0:00:36.280 --> 0:00:39.320 but the Federal Trade Commission says it's still up to 0:00:39.360 --> 0:00:43.480 the same game, not designing its own technology, but buying 0:00:43.560 --> 0:00:46.960 up a smaller company with the technology it needs and 0:00:47.000 --> 0:00:51.960 eliminating any competition. Meta announced its deal to buy Within Unlimited, 0:00:52.040 --> 0:00:55.640 a virtual reality fitness app, just one day after Mark 0:00:55.720 --> 0:01:00.080 Zuckerberg announced its name change. The FTC is suing to 0:01:00.240 --> 0:01:03.000 stop the deal, saying Meta is trying to create a 0:01:03.040 --> 0:01:06.959 monopoly in virtual reality in the same way that Facebook 0:01:07.000 --> 0:01:10.560 brought up Instagram and WhatsApp to extend its dominance in 0:01:10.680 --> 0:01:15.080 social networking. Joining me is Bloomberg Intelligence Senior litigation analyst 0:01:15.200 --> 0:01:19.800 Jennifer Ree. Why is the FTC trying to stop Meta 0:01:20.040 --> 0:01:23.240 from buying Within? What they're trying to do, I think 0:01:23.480 --> 0:01:25.760 is not make the same mistake that they believe they 0:01:25.800 --> 0:01:29.000 made in the past when they cleared FTCs acquisitions of 0:01:29.200 --> 0:01:32.960 Instagram and WhatsApp. They're looking at Meta as a company 0:01:33.000 --> 0:01:36.240 that's trying to sort of take over this burgeoning virtual 0:01:36.280 --> 0:01:39.640 reality space, and they see this acquisition as part of that. 0:01:40.040 --> 0:01:43.600 Within makes virtual reality apps. It has a very popular 0:01:43.640 --> 0:01:47.040 one for fitness called Supernatural. And what the FTC claims 0:01:47.120 --> 0:01:50.080 is that if Meta didn't buy Within, they would be 0:01:50.120 --> 0:01:53.000 competing on their own because they have the resources, and 0:01:53.040 --> 0:01:55.960 they have the wherewithal and the interest in developing their 0:01:56.000 --> 0:01:58.120 own fitness app that would compete, and it would be 0:01:58.120 --> 0:02:00.960 better for them to compete than to buy Within and 0:02:01.000 --> 0:02:04.040 go forward in virtual reality fitness that way. So the 0:02:04.080 --> 0:02:07.680 allegations here is of potential competition that if it didn't 0:02:07.720 --> 0:02:10.440 buy Within, Meta would compete with them in the future, 0:02:10.520 --> 0:02:13.799 even though it doesn't today. Has that theory of potential 0:02:13.880 --> 0:02:18.360 competition been used frequently. It hasn't been used frequently. It 0:02:18.440 --> 0:02:21.240 has been used before. Most of the cases that the 0:02:21.280 --> 0:02:24.520 FTC is relying on here are from the nineteen seventies, 0:02:24.800 --> 0:02:28.440 because the more recent limited use in court hasn't been successful. 0:02:28.560 --> 0:02:30.880 I mean, one of the mergers that was challenged on 0:02:30.919 --> 0:02:34.160 this basis was between two companies called Steris and Synergy, 0:02:34.240 --> 0:02:37.200 and the etc failed to succeed in that challenge in 0:02:37.240 --> 0:02:39.880 court because it's very very difficult to prove, you know, 0:02:39.919 --> 0:02:42.040 you have to show that the company actually had a 0:02:42.120 --> 0:02:45.200 serious interest in entering the market and was well on 0:02:45.280 --> 0:02:47.520 its way to do so and probably would have been 0:02:47.520 --> 0:02:50.360 able to do so and been successful. So MENA has 0:02:50.400 --> 0:02:55.560 bought more than a hundred smaller companies, including nine virtual 0:02:55.639 --> 0:02:59.600 reality apps studios, over the last three years. This is 0:02:59.600 --> 0:03:03.600 the first time the FTC has challenged a deal before 0:03:04.000 --> 0:03:07.280 it takes place. Why now, is it the timing when 0:03:07.320 --> 0:03:10.360 the FTC is on this aggressive path, or is it 0:03:10.440 --> 0:03:13.000 the deal in particular? You know, I think it's a 0:03:13.000 --> 0:03:15.760 combination of things. It's certainly the timing, but also some 0:03:15.880 --> 0:03:18.600 of those past acquisitions may have been too small to 0:03:18.680 --> 0:03:20.920 have to be filed under the heart Scot Rodino Act, 0:03:21.120 --> 0:03:23.360 and they just may have fallen under the radar, you know, 0:03:23.440 --> 0:03:26.919 not been noticed, gone ahead, enclosed without the FTC having 0:03:26.960 --> 0:03:28.920 a chance to take a look at them. But the 0:03:28.960 --> 0:03:32.680 FTC in particular, as I said, I think regrets some 0:03:32.840 --> 0:03:36.800 of the past acquisition activity of big tech platforms in general, 0:03:36.840 --> 0:03:39.480 and particularly Meta that have allowed them to kind of 0:03:39.520 --> 0:03:42.480 take over full spaces, and they see that Meta has 0:03:42.520 --> 0:03:44.960 this goal to move forward and to try to become 0:03:44.960 --> 0:03:47.800 dominant in virtual reality, and what they're trying to do 0:03:47.880 --> 0:03:49.560 is just nip it in the button. They see this 0:03:49.640 --> 0:03:52.880 as one step towards that goal. You know, Meta already 0:03:52.960 --> 0:03:56.720 has through its acquisition of Oculus, the hardware that people 0:03:56.840 --> 0:03:59.920 use for virtual reality gaming and virtual reality apps, and 0:04:00.040 --> 0:04:02.760 it has a content store where it's creating some of 0:04:02.800 --> 0:04:05.120 its own virtual reality apps, and now it's trying to 0:04:05.160 --> 0:04:08.040 buy up more content. So the FTC bus this is 0:04:08.080 --> 0:04:11.360 just one more step towards Meta taking over that space, 0:04:11.480 --> 0:04:14.280 kind of becoming the Apple of that space. You know, 0:04:14.400 --> 0:04:16.680 these are all the allegations with Apple and its app 0:04:16.720 --> 0:04:19.560 store and how it controls access to apps on iOS 0:04:19.640 --> 0:04:21.720 mobile devices, and I think what they're doing here is 0:04:21.760 --> 0:04:24.960 trying to prevent Meta from getting to that place. What 0:04:25.120 --> 0:04:28.640 is Meta's defense here? What is its response? Well, first 0:04:28.640 --> 0:04:30.760 of all, that it doesn't compete with this company, and 0:04:30.760 --> 0:04:33.320 that it's a very small company and buying you know, 0:04:33.720 --> 0:04:36.800 a small virtual reality app company in this very burgeoning 0:04:36.960 --> 0:04:40.320 new nascent industry. You know, nobody really knows what's going 0:04:40.360 --> 0:04:43.599 to happen with it. It's really it's very beginning stages 0:04:43.800 --> 0:04:45.440 that this is a very small app and it's a 0:04:45.480 --> 0:04:49.320 small fitness app and really can't have an impact on competition. 0:04:49.360 --> 0:04:51.760 I mean, a merger has to have an anti competitive 0:04:51.800 --> 0:04:54.480 impact on competition to violate the antitrust laws. And so 0:04:54.600 --> 0:04:56.880 Meta would say, well, this just doesn't. And secondly, it 0:04:56.920 --> 0:04:59.520 would say, look, we didn't have plans to develop our 0:04:59.520 --> 0:05:01.640 own fitness SAP, even if we talked about it or 0:05:01.680 --> 0:05:04.000 thought about it. You know, we talk about and think 0:05:04.040 --> 0:05:06.080 about a lot of things, and then we end up 0:05:06.160 --> 0:05:08.400 nixing those plans and we didn't have any plan to 0:05:08.440 --> 0:05:11.159 go forward with this, so we wouldn't have been a 0:05:11.200 --> 0:05:14.560 potential competitor, and we aren't buying this company so that 0:05:14.600 --> 0:05:17.919 we can buy up a potential competitor. Meta seems to 0:05:17.960 --> 0:05:22.480 have this growth by acquisition strategy. Is there anything wrong 0:05:22.480 --> 0:05:25.880 with that from an antitrust point of view, Well, there 0:05:25.880 --> 0:05:28.120 are two ways that there could be something wrong with that. 0:05:28.360 --> 0:05:31.120 The first way is if you have your own products 0:05:31.400 --> 0:05:34.400 and you see this new up and coming nascent competitor 0:05:34.640 --> 0:05:37.120 and you have concerns about that company, you think it 0:05:37.200 --> 0:05:40.600 actually could really get big and th threaten your position 0:05:40.920 --> 0:05:42.880 with the product that you already have in the market. 0:05:42.920 --> 0:05:45.040 I mean, this is what the allegations are today with 0:05:45.120 --> 0:05:49.600 respect why Facebook but Instagram. So instead of trying to compete, Hey, 0:05:49.680 --> 0:05:52.599 let's do better, let's lower our prices, let's innovate more 0:05:52.880 --> 0:05:55.440 so consumers stick with our product. Even if we face 0:05:55.480 --> 0:05:59.400 competition from this nascent entity. Let's buy it instead, because 0:05:59.400 --> 0:06:02.760 buying it just vanquished that threat, so that can be 0:06:02.839 --> 0:06:05.599 anti competitive. Then the second way could be the way 0:06:05.640 --> 0:06:09.919 the FTC leads that Meta is harming competition with the 0:06:09.960 --> 0:06:13.880 Within acquisition. It's they don't compete today and Meta doesn't 0:06:13.880 --> 0:06:17.080 necessarily view Within as a nascent competitor that threatens it 0:06:17.120 --> 0:06:19.960 down the road. But the concept is that Meta would 0:06:19.960 --> 0:06:22.640 have enter this market and competed if it didn't buy 0:06:22.800 --> 0:06:25.799 the entity, and it's better to have two competitors than one. 0:06:26.120 --> 0:06:29.159 What will the judge be looking at here? I think 0:06:29.160 --> 0:06:31.080 that the judge will be looking at a couple of things. 0:06:31.200 --> 0:06:35.000 The first thing is if the FTC has defined what 0:06:35.040 --> 0:06:38.440 we call a relevant antitrust market correctly. So, what the 0:06:38.520 --> 0:06:42.560 FTC has said is that a virtual reality fitness apps, 0:06:42.560 --> 0:06:45.680 dedicated fitness apps sit in their own relevant market that 0:06:45.800 --> 0:06:49.480 they don't compete against anything else other than other virtual 0:06:49.520 --> 0:06:52.159 reality fitness apps, So they don't compete, let's say, with 0:06:52.279 --> 0:06:56.200 other in home fitness potentials out there, like Peloton or 0:06:56.400 --> 0:06:59.040 Apple Fitness, you know, or any other kind of at 0:06:59.080 --> 0:07:02.560 home guided fitness experienced that a consumer can have. So 0:07:02.880 --> 0:07:06.000 they've defined this narrow market, and the judge will be asking, well, 0:07:06.000 --> 0:07:09.920 should that market really be broader? Do consumers actually view 0:07:10.440 --> 0:07:13.560 let's say Peloton as a substitute for this virtual reality 0:07:13.640 --> 0:07:16.920 fitness Do they price constrained against each other? Is one 0:07:17.000 --> 0:07:20.880 constraining against the other? Do they compete? So that's one issue, 0:07:21.360 --> 0:07:23.600 and I think the second issue is this whole concept 0:07:23.600 --> 0:07:26.280 of whether Meta actually would have been a potential competitor. 0:07:26.520 --> 0:07:29.400 They'll look at what metas plans, say, had the company 0:07:29.400 --> 0:07:33.120 devoted capital toward developing its own virtual reality fitness app, 0:07:33.200 --> 0:07:35.680 you know, were there approved plans to go forward with 0:07:35.760 --> 0:07:38.320 something like that that then got mixed when the company 0:07:38.360 --> 0:07:40.720 decided to buy Within instead. I mean, the proof of 0:07:40.760 --> 0:07:43.240 that will be in their documents and what their documents say, 0:07:43.640 --> 0:07:45.000 and the judge is going to have to look at 0:07:45.000 --> 0:07:47.400 that as well. And you think it's an uphill battle 0:07:47.440 --> 0:07:50.120 for the FTC. I think it's difficult because I think 0:07:50.120 --> 0:07:53.679 it's very speculative. Again, if the documents show that there 0:07:53.720 --> 0:07:57.040 were no plans to develop a virtual reality fitness app, 0:07:57.200 --> 0:07:59.360 or there might have been plans that were nixed, but 0:07:59.520 --> 0:08:01.880 nixed not because of the purchase of within, but for 0:08:01.920 --> 0:08:05.520 other reasons, you know, that kind of neutralizes this argument 0:08:05.520 --> 0:08:07.600 that they would have been a potential competitor. And I 0:08:07.600 --> 0:08:10.320 think that it's really hard to say, Hey, this company 0:08:10.480 --> 0:08:12.520 was going to enter and you know what, if they had, 0:08:12.600 --> 0:08:15.840 they would have been a vibrant competitor within very popular 0:08:15.880 --> 0:08:18.239 fitness app. I think that's difficult to prove in court. 0:08:18.520 --> 0:08:20.480 And I also think there could be some problems with 0:08:20.680 --> 0:08:23.880 the defined relevant market here um limiting it to just 0:08:24.040 --> 0:08:27.760 these virtual reality fitness apps. Is this a test case 0:08:28.120 --> 0:08:33.239 for the FTC for its more aggressive strategy on mergers, 0:08:33.400 --> 0:08:36.520 especially by the Silicon Valley giants. I think it can 0:08:36.559 --> 0:08:38.920 be thought of that way, absolutely, not just the test 0:08:38.960 --> 0:08:42.520 case to try to expand the boundaries of antitrust law 0:08:42.559 --> 0:08:45.240 and try to push some of these novel theories and 0:08:45.320 --> 0:08:48.000 have some success in court with novel theories that might 0:08:48.320 --> 0:08:51.280 open the way, open the road in the future to 0:08:51.400 --> 0:08:53.959 more easily challenge other deals. And I think it's also 0:08:54.080 --> 0:08:57.719 part of trying to prevent big tech platforms from continually 0:08:57.800 --> 0:09:01.360 growing through acquisition. You know, there's nothing on with growing organically, 0:09:01.559 --> 0:09:04.200 but just trying to prevent this growth that's happened over 0:09:04.240 --> 0:09:07.800 the last ten years through acquisition. So it's sort of twofold. 0:09:08.200 --> 0:09:11.320 Meta has said that if the judge rules against them, 0:09:11.360 --> 0:09:14.360 it will abandon the deal. If the judge rules against 0:09:14.400 --> 0:09:18.840 the FTC might have taken appeal, absolutely it could. So 0:09:18.880 --> 0:09:21.719 what happens there is if the judge rules against the FTC, 0:09:22.120 --> 0:09:24.720 technically the companies are free to go ahead and close 0:09:24.800 --> 0:09:28.400 their deal and integrate. What the FTC would do if 0:09:28.480 --> 0:09:31.600 they chose to appeal, if they'd likely seek an emergency 0:09:31.720 --> 0:09:34.560 order from the court to prevent the companies from closing 0:09:34.679 --> 0:09:37.920 just pending that appeal, and sometimes they win those. More 0:09:37.960 --> 0:09:40.319 recently in the last couple of years, they haven't been 0:09:40.320 --> 0:09:42.599 winning those orders, and then it makes more difficult for 0:09:42.640 --> 0:09:44.760 them to go through with the appeal because the companies 0:09:44.800 --> 0:09:47.640 at that point would probably go ahead and close and integrate. 0:09:47.720 --> 0:09:50.360 And now it's more difficult even if they wanted court 0:09:50.440 --> 0:09:53.640 to get a judge to require the companies to unwind 0:09:53.640 --> 0:09:57.640 the deal. Is the FTC still trying to unwind the 0:09:57.880 --> 0:10:02.280 Instagram and What'sapp purchase? Yes, there's still that litigation is 0:10:02.280 --> 0:10:04.840 still ongoing. I believe it is set to go to 0:10:04.920 --> 0:10:08.880 trial next year, either unwind or get some other kind 0:10:08.960 --> 0:10:13.360 of injunctive remedy like required interoperability or something like that 0:10:13.360 --> 0:10:17.479 that's short of unwinding the deals, but does require Facebook 0:10:17.520 --> 0:10:21.160 to allow for you know, better interoperability with other rivals 0:10:21.200 --> 0:10:24.760 and allowing users to migrate their history and their content 0:10:24.880 --> 0:10:28.120 to other platforms. So the FTC is very busy with 0:10:28.400 --> 0:10:34.600 Silicon values platforms. The Commission has voted to block Microsoft's 0:10:34.600 --> 0:10:38.240 sixty nine billion dollar acquisition of Activision, which is I 0:10:38.280 --> 0:10:41.520 was surprised at this one of the thirty biggest acquisitions 0:10:41.520 --> 0:10:44.880 of all time. What's the reason they're so that's a 0:10:44.880 --> 0:10:48.760 little bit different than the challenge to Meta and within 0:10:49.440 --> 0:10:53.160 this deal is called a vertical theory deal. So what 0:10:53.320 --> 0:10:56.960 they're objecting to here is the vertical integration between Microsoft 0:10:57.040 --> 0:10:59.920 and Activision. So in other words, Microsoft has consoles and 0:11:00.120 --> 0:11:03.800 PCs on which people can play mobile games, and Activision 0:11:03.840 --> 0:11:07.280 creates that mobile content. So there are at different levels 0:11:07.280 --> 0:11:10.920 of distribution for an entire industry of mobile game playing. 0:11:11.240 --> 0:11:14.600 And what the FTC is saying is, look, once Microsoft 0:11:14.679 --> 0:11:18.080 controls this activision content, it's going to have an increased 0:11:18.120 --> 0:11:22.240 incentive and the ability to withhold or degrade that content, 0:11:22.360 --> 0:11:24.559 and weighs that less in competition. In other words, that 0:11:24.720 --> 0:11:28.400 hurt its competitors, primarily it's competitors and consoles, which is 0:11:28.440 --> 0:11:33.479 really mostly just Sony. Sony, which is a competitor for Microsoft, 0:11:33.840 --> 0:11:38.520 is objecting because it's concerned that Microsoft could make games 0:11:38.559 --> 0:11:43.280 like Call of Duty exclusive. And apparently Microsoft has something 0:11:43.280 --> 0:11:45.840 of a history here. Well, you know, yes and no. 0:11:46.280 --> 0:11:49.320 I'll start by saying it has actually been fairly typical 0:11:49.760 --> 0:11:53.319 for console companies to have exclusive games. Sony itself, which 0:11:53.360 --> 0:11:57.120 has the PlayStation console, has games that are exclusive to PlayStation. 0:11:57.360 --> 0:12:00.240 It does that, and Microsoft has some exclusive games as well. 0:12:00.520 --> 0:12:03.800 So Microsoft a couple of years ago acquired Zenemax, and 0:12:04.120 --> 0:12:06.920 when they did, they were cleared by the European Commission 0:12:06.960 --> 0:12:08.920 which took a look at the deal, and the European 0:12:08.920 --> 0:12:12.079 Commission cleared it without any commitments. So Microsoft didn't make 0:12:12.120 --> 0:12:15.800 any commitments to the Commission that it would not make 0:12:15.880 --> 0:12:19.160 certain games exclusive. Now, we did tell the Commission, we 0:12:19.240 --> 0:12:22.520 don't have an incentive to take these games as exclusives, 0:12:22.679 --> 0:12:25.160 but it later did do so. And this is what 0:12:25.240 --> 0:12:27.679 the FTC has mentioned in its complaints, saying that, well, 0:12:27.720 --> 0:12:30.400 even if Microsoft says we have no incentive to go 0:12:30.480 --> 0:12:32.880 exclusive with these games, hey, that's what it said that 0:12:32.920 --> 0:12:35.719 the European Commission when it acquired Dnomax. But it went 0:12:35.720 --> 0:12:38.480 ahead and did that. But the European Commission is actually saying, 0:12:38.520 --> 0:12:41.320 you know, it's not exactly right. You know, we cleared 0:12:41.320 --> 0:12:44.040 it because we actually just didn't think the deal was problematic, 0:12:44.320 --> 0:12:47.120 and even if they took the games exclusive, we didn't 0:12:47.120 --> 0:12:50.240 think that was problematic or could harm competition. So it 0:12:50.320 --> 0:12:52.720 really wasn't an issue, and we weren't telling them you 0:12:52.720 --> 0:12:55.440 shouldn't or can't take these games exclusive. And it only 0:12:55.480 --> 0:12:58.160 took some of the Zenmax games exclusive, not all of them. 0:12:58.200 --> 0:13:03.000 So you know, it's maybe lightly disingenuous to rely on 0:13:03.160 --> 0:13:06.720 that conduct and compare that conduct to what might happen here, 0:13:07.080 --> 0:13:11.080 particularly because Microsoft has been very open about the fact 0:13:11.160 --> 0:13:13.720 that it's willing to extend a ten year license to 0:13:13.760 --> 0:13:16.400 Sony for the Call of Duty games. Now, I think 0:13:16.440 --> 0:13:18.120 it might have to do a little bit better than that. 0:13:18.160 --> 0:13:21.040 It might have to include other activision games within that 0:13:21.120 --> 0:13:23.400 license and not just Call of Duty. But it's been 0:13:23.440 --> 0:13:27.320 fairly open about willing to enter into a legally binding contract, 0:13:27.400 --> 0:13:31.200 you know, a license to you know, not foreclosed Sony 0:13:31.280 --> 0:13:34.040 and to provide Call of Duty to Sony for PlayStation 0:13:34.040 --> 0:13:36.920 players to go ahead and play. So I think that again, 0:13:36.960 --> 0:13:39.360 this deal might be a little bit difficult also in 0:13:39.440 --> 0:13:42.280 court for the FTC, because you know, you have that 0:13:42.360 --> 0:13:45.319 promise out there by Microsoft which is more than just work. 0:13:45.480 --> 0:13:47.560 You know, it would be legally binding if it entered 0:13:47.559 --> 0:13:51.760 a license. Clarify, what is Microsoft's defense, Well, I mean 0:13:51.760 --> 0:13:54.440 it is saying that it doesn't have the incentive or 0:13:54.480 --> 0:13:57.240 the ability to take these games exclusive. And and the 0:13:57.280 --> 0:14:01.040 reasoning behind this, the theory, let's behind this that the 0:14:01.120 --> 0:14:04.319 FDC would have to prove in court is that Microsoft 0:14:04.320 --> 0:14:07.480 would take these games exclusive or particularly Call of Duty, 0:14:07.760 --> 0:14:11.319 and by doing so, it would not get the licensing fees, 0:14:11.360 --> 0:14:14.000 the licensing that would have been paid to it, you know, 0:14:14.040 --> 0:14:16.480 the revenue it would have achieved from licensing fees from 0:14:16.520 --> 0:14:19.720 other companies because it's now taken the game exclusive. But 0:14:19.840 --> 0:14:23.360 that ultimately it will be more profitable from Microsoft to 0:14:23.400 --> 0:14:26.160 forgo those fees because down the road, it would drive 0:14:26.240 --> 0:14:30.520 more consumers to its console, It's Xbox over the PlayStation, 0:14:30.760 --> 0:14:34.880 and it would recoup revenues by selling the Xbox to consumers. 0:14:34.920 --> 0:14:37.400 And Microsoft saying no, that's just not really the case, 0:14:37.680 --> 0:14:39.920 that the math doesn't work out that way for us. 0:14:39.920 --> 0:14:43.040 It's actually more profitable for us to make these games 0:14:43.080 --> 0:14:46.720 widely available, to collect these licensing fees, and to continue 0:14:46.720 --> 0:14:49.560 to sell our console, which I believe they sell at 0:14:49.600 --> 0:14:52.320 a very low margin. So the proof is going to 0:14:52.400 --> 0:14:54.640 be in the math. I mean, there will be complicated 0:14:54.680 --> 0:14:59.120 analytics that are presented to the judge by economic experts 0:14:59.160 --> 0:15:02.560 on both sides showing whether or not a strategy like 0:15:02.640 --> 0:15:05.920 that would be profitable to Microsoft down the road or wouldn't. 0:15:06.120 --> 0:15:09.880 And that's really very difficult to show, June Um. This 0:15:09.960 --> 0:15:13.840 is very similar to what the Department of Justice tried 0:15:13.880 --> 0:15:15.840 to do when it suits to block a T and 0:15:15.880 --> 0:15:20.680 T from acquiring Time Warner. Very similar concept and and 0:15:20.800 --> 0:15:23.480 similar analytics. And you know, you had to go in 0:15:23.480 --> 0:15:26.320 there and prove that this kind of strategy would be 0:15:26.600 --> 0:15:29.400 profitable for the company, and it just didn't work. You know, 0:15:29.520 --> 0:15:32.360 the model that the economists presented had a lot of 0:15:32.400 --> 0:15:34.800 problems with it, had a lot of weaknesses in it 0:15:34.840 --> 0:15:37.200 that the judge pointed out, and he had some issues 0:15:37.240 --> 0:15:39.080 with it, and he just simply didn't feel that they 0:15:39.160 --> 0:15:41.480 proved that it would have been profitable for the companies 0:15:41.520 --> 0:15:43.680 to engage in that kind of strategy. And so there 0:15:43.720 --> 0:15:46.520 could be the same kind of challenge here, and Microsoft, 0:15:46.520 --> 0:15:49.600 of course will have their own experts showing how it's 0:15:49.640 --> 0:15:52.840 not profitable and wouldn't make sense for Microsoft to take 0:15:52.880 --> 0:15:56.080 these games exclusive. This is an in house trial with 0:15:56.160 --> 0:16:01.600 an administrative law judge. Oftentimes defended say that in those 0:16:01.680 --> 0:16:05.920 cases the in house law judge, the administrative law judge, 0:16:05.960 --> 0:16:09.520 favors the agency. So I have a couple of theories 0:16:09.560 --> 0:16:11.600 about this. I think, first of all, there has been 0:16:11.640 --> 0:16:14.400 a pattern if you look at the last ten fifteen 0:16:14.480 --> 0:16:18.840 years of the FDC winning those few we call it 0:16:18.880 --> 0:16:22.200 apart three when you go through these proceedings internally, very 0:16:22.240 --> 0:16:24.480 few actually go through to the finish. But for the 0:16:24.560 --> 0:16:26.640 few that have gone through the finish, we have seen 0:16:26.720 --> 0:16:28.840 that the FTC is a good track record. But I 0:16:28.920 --> 0:16:31.200 tend to think that that could be because at least 0:16:31.240 --> 0:16:34.880 in the past until this administration, the FTC would bring 0:16:34.920 --> 0:16:37.960 cases that were easier to win, that they had better 0:16:38.000 --> 0:16:42.440 evidence on their side, They had stronger, more traditional antitrust theories, 0:16:42.600 --> 0:16:44.440 so it was more likely they were going to win. 0:16:45.000 --> 0:16:48.600 This judge, in fact, has recently ruled against the FTC 0:16:48.720 --> 0:16:52.920 in two recent Part three proceedings. One was the merger 0:16:52.960 --> 0:16:56.000 of Alumina and Grail that challenge and the other one 0:16:56.160 --> 0:16:58.960 was a challenge to all Trea's investment in Jewel. These 0:16:58.960 --> 0:17:01.920 were both in the last couple years. Same administrative law 0:17:02.000 --> 0:17:04.600 judge that would oversee this hearing, and he ruled against 0:17:04.640 --> 0:17:07.520 the FTC. I tend to believe he actually is quite 0:17:07.600 --> 0:17:12.440 independent and doesn't really essentially favor the FTC going in now. 0:17:12.480 --> 0:17:16.000 I'm a little confused about the timing because the trial 0:17:16.080 --> 0:17:20.680 is set for August two, but the deal is set 0:17:20.720 --> 0:17:25.800 to close by June. That's a problem for the company. Yeah, 0:17:26.200 --> 0:17:29.280 So the timing is very complicated here because right now 0:17:29.320 --> 0:17:33.440 the companies cannot close because there are anti trust investigations 0:17:33.480 --> 0:17:36.880 that are still outstanding in the UK and in Europe 0:17:36.920 --> 0:17:41.560 before the European Commission, and those reviews keep the companies 0:17:41.920 --> 0:17:44.879 from being able to close their deal. Now both of 0:17:44.920 --> 0:17:48.200 those right now have decision dates in the first quarter, 0:17:48.280 --> 0:17:50.000 one of them in March and one of them in 0:17:50.040 --> 0:17:55.199 April if they clear. If the both the UK and 0:17:55.359 --> 0:17:59.679 Europe clear Microsoft in activision to close their deal, technically 0:17:59.720 --> 0:18:03.360 they can even though this Part three procedure is pending. 0:18:03.680 --> 0:18:07.560 So what will have to happen is the FTC, in 0:18:07.640 --> 0:18:10.680 communication with Europe and with the UK, will know if 0:18:10.720 --> 0:18:13.840 that's coming, and they'll have to actually sue the companies 0:18:14.119 --> 0:18:17.159 for a preliminary injunction in federal court in the United 0:18:17.200 --> 0:18:20.520 States to get a temporary block not permanent, but just 0:18:20.600 --> 0:18:24.040 a temporary block on the closing pending their Part three. Otherwise, 0:18:24.160 --> 0:18:26.760 even though the Part three is ongoing, the companies would 0:18:26.800 --> 0:18:29.360 still be able to close. So I think that that's 0:18:29.400 --> 0:18:32.439 what they will do if those approvals are forthcoming. So 0:18:32.520 --> 0:18:35.240 we might see a filing in federal court sometime in 0:18:35.320 --> 0:18:38.439 February or maybe in March by the FTC, and that 0:18:38.520 --> 0:18:41.880 process will finish up if it happens more quickly than 0:18:41.920 --> 0:18:45.080 the Part three. Now, if there aren't approvals in the 0:18:45.160 --> 0:18:48.159 UK and Europe and Microsoft has to fight those as well, 0:18:48.440 --> 0:18:50.720 they're either going to have to abandon the deal or 0:18:50.760 --> 0:18:52.679 the companies are going to have to agree to extend 0:18:52.680 --> 0:18:57.600 that ending. What's FTC Chair Lena Kahn's records so far, Yeah, 0:18:57.640 --> 0:18:59.840 you know, it's a little bit mixed. Yeah. She she 0:19:00.080 --> 0:19:02.879 was really kind of hobbled for quite a long time 0:19:03.080 --> 0:19:06.600 when she first took on the chairpersonship because it was 0:19:06.640 --> 0:19:10.960 a split FTC. There were two Republican commissioners and two 0:19:11.000 --> 0:19:14.000 Democratic commissioners. One of them was Lena Khan. You know, 0:19:14.040 --> 0:19:16.879 there was some trouble because there were some split vote 0:19:16.960 --> 0:19:19.680 two to two and when the commission ties they can't 0:19:19.720 --> 0:19:22.640 take action, it would mean no lawsuit against the deal, 0:19:22.680 --> 0:19:24.639 and and that kind of stopped her for a while. 0:19:24.960 --> 0:19:28.840 But once the final commissioner was appointed and confirmed that 0:19:28.920 --> 0:19:31.239 was al Vero Badoya, she's been able to do a 0:19:31.240 --> 0:19:34.280 little bit more. And I say it's mixed because she's 0:19:34.320 --> 0:19:37.600 been able to get some abandonments of deals with which 0:19:37.600 --> 0:19:40.040 the FTC would look at as a success when they 0:19:40.119 --> 0:19:42.800 sue and instead of having to go through litigation and 0:19:42.840 --> 0:19:45.000 when in court, the companies too, you know, just to 0:19:45.040 --> 0:19:48.120 walk away. So they did manage that with Lockheed Arrow Jet, 0:19:48.160 --> 0:19:50.600 and they also managed that within Video Arm and there 0:19:50.640 --> 0:19:53.520 were several hospital deal three of them in fact, in 0:19:53.600 --> 0:19:56.080 two thousand and twenty two that all abandoned their deal. 0:19:56.200 --> 0:19:58.959 And and those are successes, even though it's not necessarily 0:19:59.000 --> 0:20:01.520 a court success. But there were the two losses in 0:20:01.560 --> 0:20:04.280 their own internal court. I just mentioned the Illuminate Grail 0:20:04.440 --> 0:20:07.600 and the Ultria Jewel losses. So those weren't great. And 0:20:07.640 --> 0:20:10.240 now we'll see what happens. You've got to outstanding right 0:20:10.280 --> 0:20:14.480 now with Microsoft Activision and with Meta Within. And it's 0:20:14.560 --> 0:20:17.320 unclear whether Microsoft Activision will get all the way to 0:20:17.359 --> 0:20:20.239 a court decision, but clearly Meta Within will that. We 0:20:20.280 --> 0:20:22.480 expect the decision in that one in December, So we'll 0:20:22.520 --> 0:20:25.160 see what happens there because that'll show us at the 0:20:25.200 --> 0:20:27.920 beginning of her record and actually in federal court. Thanks 0:20:27.920 --> 0:20:32.400 so much, Jan, that's Bloomberg Intelligence Senior litigation analyst Jennifer Ree. 0:20:33.640 --> 0:20:37.399 A New York law temporarily lifts the statute of limitations 0:20:37.440 --> 0:20:41.439 on civil sexual abuse and harassment claims and is expected 0:20:41.440 --> 0:20:45.119 to lead to a flood of lawsuits. In fact, lawsuits 0:20:45.119 --> 0:20:49.040 have already been filed against former President Donald Trump, comedian 0:20:49.119 --> 0:20:53.879 Bill Cosby, and billionaire Leon Black over allegations they assaulted 0:20:53.920 --> 0:20:57.879 women decades ago. Which their lawyers deny joining me is 0:20:57.880 --> 0:21:02.040 Bloomberg Legal reporter Eric Larson tell us more about this law. 0:21:02.600 --> 0:21:05.760 So the law called the New York Adult Survivor's apt 0:21:06.000 --> 0:21:08.680 It was signed into law in May and it took 0:21:08.720 --> 0:21:12.600 effect last month on Thanksgiving Day. And what it does 0:21:13.040 --> 0:21:17.119 is it lists temporarily for one year, lists the statute 0:21:17.160 --> 0:21:21.840 of limitations on civil claims over sexual offenses like sexual 0:21:21.880 --> 0:21:25.400 abuse and harassments. So it's a fairly new type of law. 0:21:25.880 --> 0:21:29.280 It just took effects. So what we're expecting is that 0:21:29.480 --> 0:21:31.679 is quite a few lawsuits to be filed in the 0:21:31.720 --> 0:21:36.440 next year. Was this in response to the me too movement? 0:21:37.280 --> 0:21:41.320 It was definitely related to that. In two thousand nineteen, 0:21:41.840 --> 0:21:45.640 the New York State legislature actually changed to the statute 0:21:45.680 --> 0:21:50.600 of limitations for sexual offenses from one year to twenty years, 0:21:50.640 --> 0:21:55.199 so really acknowledging that, you know, there's a unique circumstances 0:21:55.200 --> 0:21:58.199