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Speaker 1: This is Bloomberg Law with June Grosso from Bloomberg Radio.

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Speaker 2: This is Bloomberg Law. I'm Madison Mills. I'm in for

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Speaker 2: June Grasso.

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Speaker 1: This week you got to talk about this Microsoft deal

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Speaker 1: because Microsoft's sixty nine billion dollar acquisition of Activision Blizzard

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Speaker 1: was temporarily blocked by a federal judge in California, that

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Speaker 1: judge saying a temporary restraining order was necessary to maintain

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Speaker 1: the status quo while the FTC challenges the deal. So

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Speaker 1: here it makes sense of what all that means for us.

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Speaker 1: As Jennifer Ree, Bloomberg Intelligence senior antitrust analyst, jen thank

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Speaker 1: you so much for coming in to studio with us.

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Speaker 1: How big of a deal is this? Does this make

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Speaker 1: the deal dead?

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Speaker 3: Madison first, thanks for having me. You know, I really

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Speaker 3: don't think it does. I mean, I think this is

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Speaker 3: a very important step to understand whether this deal is

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Speaker 3: going to be dead or not. I mean, bear in

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Speaker 3: mind that the temporary restraining order that was issued is

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Speaker 3: very short term. You know, that's not a long term

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Speaker 3: block the deal. That's just a block to give that

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Speaker 3: federal court time to decide whether they should issue a

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Speaker 3: preliminary injunction, which would then block the deal, allowing the

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Speaker 3: FTC's internal process to complete. That it won't complete, probably

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Speaker 3: till about one Q. There will be a hearing on

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Speaker 3: the preliminary injunction next week, starting on June twenty second,

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Speaker 3: So the temporary restraining order that was entered only lasts

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Speaker 3: until basically the later of five days after that decision

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Speaker 3: if it's good for Microsoft and basically clears Microsoft, or

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Speaker 3: some other date that the judge might set.

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Speaker 1: Well, was there any information that we got from this

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Speaker 1: decision that was different than the UK decision and gives

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Speaker 1: us intel into the thinking of the legal system here

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Speaker 1: in the US versus the UK and how they might

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Speaker 1: be different.

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Speaker 3: You know, not, really, this is really just procedural. A

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Speaker 3: tro whist for temporary restraining order is really easy to get.

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Speaker 3: The standards are very low. That's not a surprise. When

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Speaker 3: the preliminary injunction decision comes out, that'll really give us

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Speaker 3: some insight into how the US judge views this versus

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Speaker 3: how the UK is viewing it. Now, I should say

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Speaker 3: she said something interesting a few weeks ago. She is

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Speaker 3: presiding over a private case in which consumers are actually

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Speaker 3: challenging this deal. That happens once in a while. Those

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Speaker 3: kinds of cases don't tend to go very far. But

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Speaker 3: this judge, Judge Corley, is presiding over that case and

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Speaker 3: the UK decision did come up, and she said, it

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Speaker 3: doesn't My standards are different. I'm not you know, what

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Speaker 3: the UK did doesn't necessarily matter to me. I have

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Speaker 3: to look at the evidence that's presented to me in

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Speaker 3: this case to make my decision. So she's very much

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Speaker 3: understands where things are, but is ready to weigh the

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Speaker 3: evidence that's presented to or in this hearing that we'll

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Speaker 3: start on June twenty second, And.

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Speaker 1: Just to give our audience the recap, can you remind

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Speaker 1: us the status of the UK situation as well?

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Speaker 3: Right, this is so complicated. So far, this deal has

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Speaker 3: cleared in almost every jurisdiction in which it filed except

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Speaker 3: so far the UK. In US, I believe there are

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Speaker 3: two pending that we haven't heard from Australia and New

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Speaker 3: Zealand where clearance is expected. So really we're just looking

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Speaker 3: at UK and US. So the UK Competition and Markets Authority,

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Speaker 3: after a long investigation, decided basically to block the deal.

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Speaker 3: They have a lot more power to do that at

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Speaker 3: that level than the Federal Trade Commission in the US does.

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Speaker 3: The CMA in the UK doesn't have to go to

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Speaker 3: a judge and ask a judge for that block. They

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Speaker 3: can issue that block themselves, which they've done, and Microsoft

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Speaker 3: is basically now in the middle of an appeal. That

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Speaker 3: appeal will be very difficult because the standards are very

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Speaker 3: high to overturn a CMA decision. It doesn't mean they

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Speaker 3: don't have a chance. They certainly do have a chance,

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Speaker 3: but it could take some time and they're in the

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Speaker 3: middle of that process. What we have lately heard in

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Speaker 3: the news, though, is the rumblings of the concept of

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Speaker 3: closing the deal anyway despite that outstanding the UK activity now.

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Speaker 3: That could mean closing it and then just continuing to

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Speaker 3: litigate in the UK and dealing with any sanctions that

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Speaker 3: might come, or it could mean pulling business out of

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Speaker 3: the UK and closing it could mean many different things.

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Speaker 3: It's not clear that's what Microsoft is talking internally to

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Speaker 3: its attorneys about now, but I think that's what prompted

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Speaker 3: the FTC to file the suit in California because they

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Speaker 3: were concerned about this news. They're hearing that Microsoft might

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Speaker 3: go ahead and close the deal. They want to protect

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Speaker 3: their internal process, which as I said, probably won't complete

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Speaker 3: until early one Q. They want that process to complete

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Speaker 3: before the parties have consummated the deal and integrated the businesses.

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Speaker 3: So that's why they went into the federal court to say, hey,

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Speaker 3: give us a really quick, just temporary block on this

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Speaker 3: deal so we can get our process done.

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Speaker 1: If the US and the UK both shoot down the deal,

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Speaker 1: can it still work outside of these two jurisdictions or

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Speaker 1: at that point is it kind of not worth it?

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Speaker 3: I think at that point it's probably done. I mean,

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Speaker 3: you're talking about two really big economies, especially for gaming.

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Speaker 3: I don't think it would make sense for the companies

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Speaker 3: to deal with the sanctions that might come if they

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Speaker 3: went ahead and closed or try to pull the businesses

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Speaker 3: out of both the US and the UK. So I

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Speaker 3: think that would be the end of the deal.

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Speaker 1: So in terms of where we're at now, if we're

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Speaker 1: driving the car, Microsoft is driving the car, we're running

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Speaker 1: out of gas, Like how much gas is left in

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Speaker 1: the tank for this fight for them?

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Speaker 3: Not that much? I think, not very much. I mean,

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Speaker 3: first issue is a deal end date in July. That's

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Speaker 3: July eighteenth, and so at that point, Activision could choose

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Speaker 3: to walk away and take a breakup fee. I believe

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Speaker 3: it's about about three billion dollars. Microsoft would have to

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Speaker 3: do something to sweeten the pot essentially to make them

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Speaker 3: stay to extend that date if they can't get cleared

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Speaker 3: and actually close the deal by that time. So you

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Speaker 3: have that kind of looming over everything, and of course

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Speaker 3: Activision will play it close to the beast test of

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Speaker 3: how they are thinking about that and what their strategy

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Speaker 3: might be, you know. And then you also just have

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Speaker 3: these tough fights. The FTC could appeal if it loses

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Speaker 3: this preliminary junction, It could appeal. If it does appeal,

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Speaker 3: it would seek an emergency order to once again keep

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Speaker 3: the companies from closing pending the appeal. You know, I

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Speaker 3: think it's unlikely would win something like that. There's still

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Speaker 3: a lot of fight left for the companies to defend here,

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Speaker 3: you know, even if they're successful in this preliminary injunction

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Speaker 3: hearing in court in California.

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Speaker 1: But obviously Microsoft has made the decision that it's totally

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Speaker 1: worth the fight. At what point when we put on

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Speaker 1: our Bloomberg intelligence hats that you put on every day

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Speaker 1: at what point is it, like, guys, this is just

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Speaker 1: not worth the money, the resources to keep fighting for this.

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Speaker 2: You know they really are.

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Speaker 3: I think probably this US process will be the one

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Speaker 3: that basically is the deciding point here for the companies.

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Speaker 3: You know, if they win this preliminary injunction, I see

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Speaker 3: them forging ahead. If they don't win this preliminary injunction,

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Speaker 3: I think at that point is when they really have

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Speaker 3: to reevaluate is it worth it to have two appeals pending,

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Speaker 3: both of which might be difficult in the US and

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Speaker 3: the UK to try to get this deal closed. It

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Speaker 3: starts to get very expensive and very lengthy at that point.

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Speaker 3: So I think that this is a very important step,

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Speaker 3: the court process that's just been started in California.

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Speaker 1: And what does it tell us about the ft see

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Speaker 1: if anything that we didn't already know. Was it surprising

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Speaker 1: to you at all to get this move from the FTC?

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Speaker 3: I was surprised because it looks like it's more serious.

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Speaker 3: It looks like the companies were considering closing over the

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Speaker 3: UK more seriously than I thought. I believed the companies

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Speaker 3: would probably work through the appeal and not try to

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Speaker 3: figure out a way to go ahead. And close with

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Speaker 3: this UK objection standing out there. But obviously, you know,

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Speaker 3: the FTC talks to these parties and is aware of

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Speaker 3: confidential information that I am not. Obviously, they were very

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Speaker 3: concerned that the companies were going to do this, so

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Speaker 3: that's why they filed this. If they didn't believe they

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Speaker 3: were going to go ahead and close, they wouldn't have

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Speaker 3: filed this. So that was surprising to me because it

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Speaker 3: meant there was more seriousness than I thought to this

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Speaker 3: talk about going ahead and closing, you know, And I

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Speaker 3: think I think that's the main thing, the fact that

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Speaker 3: they actually filed they were eventually going to have to

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Speaker 3: do it one way or another, because once the companies

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Speaker 3: were free to close, let's say they won the UK

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Speaker 3: appeal or made it very clear that they're going to

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Speaker 3: close over the UK peel, the FTC had to protect

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Speaker 3: its process by getting trying to get a federal court order.

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Speaker 1: Yeah, if you had the opportunity to have an interview

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Speaker 1: with you know, all of your favorite FTC officials, what

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Speaker 1: is the one question you would want to know from

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Speaker 1: them to give you more insight into the deal?

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Speaker 3: Well, I think I wanted exactly what those confidential discussions

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Speaker 3: have been about what Microsoft's plans are here in terms of,

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Speaker 3: you know, whether they're going to forge ahead with this

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Speaker 3: despite the UK objections or not. I mean, really, that's

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Speaker 3: a surprising thing. It's not something I've ever witnessed interesting

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Speaker 3: and I almost really hope they do it, just because

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Speaker 3: I'd like to see how it all plays out. You know,

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Speaker 3: it would be very interesting. So I think that would

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Speaker 3: be one thing I'd like to know.

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Speaker 1: And that would be bad news for a lot of

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Speaker 1: other deals, I would imagine, right, kind of does it

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Speaker 1: set a precedent for other deals or is it a

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Speaker 1: siloed decision?

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Speaker 3: You know, I think it's very siloed, because every deal

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Speaker 3: really rests on its own facts. But I think what

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Speaker 3: it does, it would better to see what happens in

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Speaker 3: the UK and how they react, right, because it might, yes,

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Speaker 3: it might open. It might give other companies ideas about this.

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Speaker 3: See the UK having this really big role in global

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Speaker 3: mergers is a very new thing. It's only a post

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Speaker 3: Brexit matter, right, because before Brexit, most deals and there

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Speaker 3: were deals that just triggered in the UK and got

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Speaker 3: UK review. They have done this before, but most big

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Speaker 3: global deals just triggered into the European Commission and UK

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Speaker 3: was part of that, right, So this is new that

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Speaker 3: this regulator has this new role where they could actually

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Speaker 3: block a global deal.

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Speaker 1: Well, it's so interesting to watch and like you said,

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Speaker 1: so many moving parts. So we are very lucky to

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Speaker 1: have you with us to break it all down again

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Speaker 1: talking about the Microsoft and Activision deal here with Bloomberg

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Speaker 1: Intelligence senior antitrust analyst Jennifer Ree.

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Speaker 2: Stick with us here on Bloomberg Law. We've got more

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Speaker 2: coverage ahead. This is Bloomberg.

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Speaker 1: This is Bloomberg Law with June Grasso from Bloomberg Radio.

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Speaker 1: I'm Madison Mills in for June Grasso this week on

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Speaker 1: Bloomberg Law. As we've been discussing this anti trust situation

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Speaker 1: Microsoft and Activision, we got to talk about the status

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Speaker 1: of anti trust battles for the FTC and here to

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Speaker 1: discuss that with us.

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Speaker 2: Is it Bloomberg Opinions. Ed Hammond ed great.

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Speaker 1: To speak with you, Thank you for having me, Thanks

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Speaker 1: for coming on. What do we need to know about

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Speaker 1: the current FDC and Department of Justice and how they're

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Speaker 1: a little different than previous reigns.

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Speaker 4: Yeah, a lot different. I would say that the hyper

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Speaker 4: aggressive to be clear, they've said that that's what they

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Speaker 4: would be like from pretty early on. And indeed, in

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Speaker 4: Lena Kahan's case, the Commissioner of the FTC, before she

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Speaker 4: even took on the role, she had sort of outlined

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Speaker 4: her philosophy, which was sort of you could think of

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Speaker 4: it as being anti scale. She thinks big is bad

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Speaker 4: pretty much regardless, and particularly where it involves technology companies.

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Speaker 4: So they've been you know, both the DOJ and the

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Speaker 4: FTC have been incredibly aggressive when it comes to M

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Speaker 4: and A and have litigated much more heavily against deals

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Speaker 4: and previous administrations have. And we're beginning to sort of

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Speaker 4: reach a point now where some of those you know,

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Speaker 4: litigations they're bringing a, they're failing, they're losing in court,

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Speaker 4: and companies are beginning to get in bold and I

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Speaker 4: think and push back against it.

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Speaker 1: So that's interesting and I want to ask you about that.

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Speaker 1: But what do you have to do to get a

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Speaker 1: deal done under this FTC?

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Speaker 4: You have to be patient, I think is probably the key. Obviously,

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Speaker 4: any litigation around M and A it prolongs the process.

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Speaker 4: So really what you need to do if you're the

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Speaker 4: acquirer coming in, you need to be mindful of the

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Speaker 4: fact it's going to take longer than would potentially be

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Speaker 4: the case under less stringent regulatory environments, and you have

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Speaker 4: to go vince sella that that's in their best interest

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Speaker 4: as well. Obviously as a company on the cell side,

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Speaker 4: you know, you want the deal to happen as quickly

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Speaker 4: and as with the little friction as possible. And if

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Speaker 4: you're saying to someone selling the company, look, you might

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Speaker 4: be waiting two years, there's a lot that can happen

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Speaker 4: in that period. Obviously that's a difficult decision for a

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Speaker 4: sell side company to make. So I think really it's

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Speaker 4: about like both sides being very committed to it, saying

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Speaker 4: they're going to fight whatever they need to fight to

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Speaker 4: get it done, and that they are willing for the

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Speaker 4: you know, durational aspect of.

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Speaker 1: It to play out.

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Speaker 2: And how much power do the companies have here?

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Speaker 4: I think increasingly the companies and you know, the advisors

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Speaker 4: that I speak to who work with a lot of

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Speaker 4: these companies are of the mind that they have more

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Speaker 4: power than they perhaps at first thought. I think some

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Speaker 4: of the FTC's cases have been fairly weak on the

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Speaker 4: face of it, and obviously as they go through the

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Speaker 4: courts that's being proven out, and particularly you know, at

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Speaker 4: the moment they seem to be getting in front of

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Speaker 4: judges who are not necessarily very favorable to their way

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Speaker 4: of thinking. And I think that's given companies the view that, look, yes,

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Speaker 4: the regulator environment creates hurdles, but the hurdables are hurdles sorry,

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Speaker 4: that are surmountable. And that wasn't usually the case. Traditionally

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Speaker 4: the viewers that if the FTC or DOJ came out

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Speaker 4: against your deal, the deal probably died. You probably said, well,

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Speaker 4: you know what, even if we have a shot at

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Speaker 4: winning this in court, it's you know, it's ultimately it's

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Speaker 4: probably going to break up. Now I think companies are

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Speaker 4: thinking about this bit differently and saying, you know, if

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Speaker 4: we want to do this deal, we're going into it

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Speaker 4: with the expectation that we're going to have to fight,

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Speaker 4: and so that being baked into the assumptions about why

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Speaker 4: they're going to do the deal, they're much more willing

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Speaker 4: to go through the whole process with the FTC.

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Speaker 1: Does it make the bar higher or harder for deals

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Speaker 1: because of that?

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Speaker 4: It should do. It should mean that, you know, deals

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Speaker 4: that sort of don't make any sense and that would

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Speaker 4: probably get litigated against in any regulator environment are less

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Speaker 4: likely to happen. But I think, you know, we've seen

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Speaker 4: a real chilling effect on deals obviously that the reason

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Speaker 4: they've done this has been, you know, very aggressive against

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Speaker 4: deeals is because they do want to have a chilling

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Speaker 4: effect on M and A. They want to slow down

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Speaker 4: M and A. And it's worked so far. There has

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Speaker 4: been like a significant drop off in the number of

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Speaker 4: deals being announced, but I think that could flip back,

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Speaker 4: particularly if we get later into the Biden administration, in

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Speaker 4: terms of companies being in bold and as I say,

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Speaker 4: try and push through some of these things.

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Speaker 1: Yeah, all right, well, Ed Hammond, thank you so much

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Speaker 1: for joining us. Really appreciate it. You can read Ed's

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Speaker 1: story of course on the terminal FTC surrenders its best

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Speaker 1: weapon in anti trust battle.

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Speaker 2: That's from Bloomberg.

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Speaker 1: Opinions, Ed Hammond, continue and follow us here on Bloomberg

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Speaker 1: Law for all of the legal news you need throughout

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Speaker 1: the week. I'm Madison Mills in for June Graso, and

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