Could the Federal Trade Commission Say No to Electronic Arts' Bid to Acquire Take-Two? A Former FTC Lawyer Takes a Closer Look at the Prospective Deal

re: Could the Federal Trade Commission Say No to Electronic Arts' Bid to Acquire Take-Two? A Former FTC Lawyer Takes a Closer Look at the Prospective Deal

Evan Narcisse — Mon, 31 Mar 2008 09:19:33 GMT

Great post, Justin! It's a clear distillation of seemingly arcane processes. I think as economic uncertainty ripples across the world, the possibility of consolidation will look more and more attractive to companies trying to weather the storm.

If I understand the points you've laid out correctly, one tack that EA/Take Two could take would be to say that the hockey video game market is broader than just their two licensed offerings, throwing every game that has hockey into the mix (arcadey games, Olympic tie-in games, kid-centric titles like Backyard Hockey) to bolster their logic.

It could be another case where the conceptions of decision-makers who don't track the video game corner of the business and cultural worlds can be shaped by the people who have the opportunity to make that first impression. The stakes here, though, are higher than just shaping opinion; the arguments and decisions–assuming all this even gets to the point where the FTC gets involved–would impact the way business gets done in the video game industry.

re: Could the Federal Trade Commission Say No to Electronic Arts' Bid to Acquire Take-Two? A Former FTC Lawyer Takes a Closer Look at the Prospective Deal

Rabbit — Mon, 31 Mar 2008 12:17:41 GMT

Definitely a cogent argument, but having spent a fair amount of time covering anti-trust in technology before, I find it exceedingly unlikely that there would actually be Fed involvement without significant political pressure. I don't believe there is any stomach for that, as FTC action would inevitably be perceived as defense of GTA IV. Have fun lining up the politicians behind that one in an election year.

Further, the tendency at the FTC has been (to my view) to get pretty hardcore about economic impacts before getting involved, and this fails on two big fronts: it's entertainment, and it's extraordinarily price constrained. I doubt even Zelnick could stand up in front of a judge with a straight face and suggest that all of the sudden EA can charge $100 for Madden in 2009.

Not saying they couldn't get interested, and there couldn't be delays, but I think FTC fingers were heavily burned by the Wild Oats deal.

re: Could the Federal Trade Commission Say No to Electronic Arts' Bid to Acquire Take-Two? A Former FTC Lawyer Takes a Closer Look at the Prospective Deal

Evilbaby — Mon, 31 Mar 2008 15:55:28 GMT

I won't argue that you've done your homework and have a pretty well thought out argument. There is a problem with the actual premise of the argument. Sports Video games is not its own market. Video Games are probably a market, but specifically sports games I don't think could really be considered its own market. I really doubt that the FTC would look in on just the reduction of publishers making sports games.

re: Could the Federal Trade Commission Say No to Electronic Arts' Bid to Acquire Take-Two? A Former FTC Lawyer Takes a Closer Look at the Prospective Deal

frieze — Mon, 31 Mar 2008 16:55:51 GMT

I'd have to concur, while noting also that licensed professional sports are an even more narrow niche to define as a market. I'd consider the FTC stepping in at any level to regulate this about as likely as their moving against Adidas for holding the license to make official NBA jerseys. If, conversely, Adidas was engaging in anticompetitive activities against all other manufacturers of shirts and jerseys of any kind the FTC might step in, but I'd have to assume that, from a licensing/monopoly point of view, the situations are pretty much the same.

After all I could, assuming I secured the appropriate permissions, make a game based on New York's own Blacktop Street Hockey League. I don't think that it would sell quite as well as the one made by the owners of the NHL license, but that doesn't make them monopolists, they just made a deal for the better IP.

re: Could the Federal Trade Commission Say No to Electronic Arts' Bid to Acquire Take-Two? A Former FTC Lawyer Takes a Closer Look at the Prospective Deal

BigDaddyDW — Tue, 01 Apr 2008 13:38:41 GMT

I see two flaws with his argument.

First, whether EA buys Take-Two or not, any developer/publisher can make a sports game if they so choose. EA is not preventing Capcom, Rare, Sega or Nintendo from producing their own sports titles via an acquisition of Take-Two. The barriers to entry for making sports titles are the same as any other videogame, with the exception of the licensing fees paid to the leagues. Which brings me to point #2.

If EA was allowed to buy an exclusive license from the NFL, thereby shutting out every other developer from making an NFL game, the acquisition of Take-Two should not cause anyone to blink.

The real question I am asking, is why didn't Microsoft buy Take-Two? Even if T2 had already signed a deal to provide GTA IV to the PS3, it would have been worth it...a Microsoft owned T2 would make GTA V an exclusive. Not to mention keeping Bioshock a permanent Xbox franchise.

How about it, N'gai - do you have any inside information as to whether or not Redmond even tried to buy T-2?