Thread by @Florian4Gamers

The livestream from the Competition Appeal Tribunal of the UK is about to begin. I'll share observations here.

The whole world except for two outlier agencies--the FTC loses almost every court case; the CMA issued a crazy merger-blocking decision--approves the deal.

🧵1/X

Justice Smith says the hearing was scheduled on short notice. That is undoubtedly true.

At the moment Justice Smith is alone, so there doesn't seem to be a panel of 3 yet.

🧵2/X

Goal would be to hold hearing in July. CMA apparently wants to stall. But Justice Smith now wants to hear from Microsoft's counsel, Daniel Beard KC, whether it's worth shooting for.

🧵3/X

CMA has said in submission it doesn't want the appellate hearing before the summer (CAT doesn't hold hearings in August) but in the fall.

That attitude confirms the CMA's regrettable ANTI-BUSINESS attitude. UK is closed for business it the CMA gets its way!

🧵4/X

Microsoft's counsel now says how the CMA objects. The CMA says the appeal is long. CMA ruling is more than 400 pages, MSFT had 4 weeks to appeal. MSFT wanted to ensure that it would be full enough, so no 2nd round of pleadings would be needed in order to save time!

🧵5/X

Justice Smith wants to discuss how to make the job of near-term hearing "more manageable". Now talking about his perspective on roadblocks. Question of expert evidence, not now but at some point: seems to judge that it's a potentially derailing question.

🧵6/X

Justice Smith says interventions could slow things down. Interventions would be possible on both sides.

Then there's the issue of disclosure (of confidential information).

🧵7/X

MSFT counsel: if this does not move forward quickly, risk of merger not happening. CMA argued that other regulators haven't approved either. MSFT counsel said CMA is highly selective.

🧵8/X

MSFT counsel: CMA is the outlier here, IT risks derailing the deal. Prospects of deal being disrupted increase over time as delay continues.

MSFT says CMA refers to 3 jurisdictions: Canada, NZ -- approval not granted. But CMA doesn't know outcome.

🧵9/X

UNDER CANADIAN LAW THE DEAL COULD ALREADY BE CLOSED!

While there is an investigation pending, they're overtime and therefore the investigation is no obstacle to closing the deal.

🧵10/X

In the U.S. the Hart-Scott-Rodino waiting period has also expired. U.S. law would not make it illegal to close the deal now. The FTC would have to seek an injunction and that hasn't happened, MSFT counsel says.

🧵11/X

Bottom line is: MSFT getting clearance in other jurisdictions, it's a worldwide merger, MSFT wants to close as quickly as possible. CMA decision is the outlier, it creates the uncertainty, therefore important to remove that uncertainty.

🧵12/X

Justice Smith now talking in the hypothetical about the possibility of MSFT's appeal succeeding and asks whether that would influence the FTC's position. MSFT counsel can't say that, mentions evidentiary hearing in August, but FTC process rather different from UK.

🧵13/X

Mentions Illumina-Grail, last major vertical merger, and FTC's Administrative Law Judge rejected the FTC's position.

MSFT counsel: evidence we see is regulators are clearing the deal, also mentioned South Korea, which became known earlier today.

🧵14/X

Justice Smith summarizing MSFT position as "closing out uncertainty in this jurisdiction is benefit" and Beard KG says "ENORMOUS benefit".

In relation to tiny part of gaming industry, CMA made REMARKABLE (not as compliment he clarifies!) decision to block WORLDWIDE deal.

🧵15/X

MSFT says that the time limit of the takeover offer, a pulic offer, encourages the IMPORTANCE of dealing with this matter as soon as possible. MSFT recognizes the date as referred to by ABK would be before July 24.

🧵16/X

MSFT counsel: "inapproriate ... CMA's approach to delay"

I must say as a litigation watcher that the CMA's unwillingness to get a quick appellate decision DESPITE the court being so willing to help says a lot about the CMA's absolutely BAD FAITH! CMA is bad-faith agency.

🧵17/X

UK politicians will be watching the hearing live now as we speak, they will get the transcript, they may even get access to the official recording.

UK politicians will see that the CMA is a LIABILITY for the British economy. It's terrible.

🧵18/X

There's a 25-page report by a U.S. law expert. Fiona Scott Morton, likely the next Chief Economist of the EC's DG COMP, also furnished a report here. And Daniel Beard KC mentions other reports, but they're not that long.

🧵19/X

Appellate hearing will NOT be like a "recapitulation" of the investigation. It will be much more narrowly focused (not his word, but that's basically the message).

MSFT very much wants a July hearing, even if shortly after the end of the term of the merger agreement.

🧵20/X

I'm not 100% sure but to me it sounds like MSFT would actually be OK with just letting the merger agreement expire on July 18 but they want to know that the CAT hearing will take place shortly thereafter.

🧵21/X

MSFT position is that the "factual material is fully justifiable" to put in. But they disagree that because of expert material this would have to move into October or November. That would force MSFT to drop the material, but the material would be OF ASSISTANCE to the CAT.

🧵22/X

MSFT counsel: CMA describes as lions and tigers in the process what are actually pussycats.

🧵23/X

MSFT is grateful to CAT for being willing to hold hearing in July and the weeks the court envisions (sounded like
week of July 24) would be about the latest that would work for MSFT.

🧵24/X

Now the CMA is arguing. They say they want to put this process into the broader context of proceedings before the CAT. All merger appeals are on expedited timetable.

🧵25/X

CMA says normal schedule would be 3 months, i.e. end of August, and CMA argues that 1 month to prepare its defense is short and defense.

But MSFT said before that it had to do its appeal in 4 weeks!

🧵26/X

CMA says it's not plausible that this case can be taken to hearing more quickly than others. CMA says "speedily, but HOW speedily?" Timing of hearing is balance between speed and court getting help (i.e., that the appellate pleadings should help the court decide).

🧵27/X

CMA says MSFT didn't mention ongoing proceedings in Canada and NZ. That is wrong as MSFT counsel (as my tweets show) explained the Canadian situation very clearly.

Now CMA points to FTC evidentiary hearing in August.

🧵28/X

CMA says the FTC doesn't have an injunction because merger can't complete because of regulatory position elsewhere "including" (in reality: ONLY) the UK.

🧵29/X

Justice Smith is clearly in favor of moving quickly.

He does not agree with CMA. Says one has a roadblock here (the CMA ruling). Apparently he also doubts that the FTC would get an injunction if it needed one.

🧵30/X

CMA says injunction question is one of "mechanics" and wants to instead focus debate on whether UK situation is all that key. CMA says "as matter of practical reality" transaction is not going to go through, UK is not roadblock, not causing incremental delay.

BULLSHIT.

🧵31/X

The CMA's behavior here is absolutely outrageous. After all of that public debate over "UK closed for business" and with THE PRIME MINISTER HIMSELF having urged them in his "strategic steer" document to make sure they don't hold up businesses, the CMA is STALLING.

🧵32/X

Now the CMA doubts that there is a risk of the deal falling through. Keeps talking about FTC proceedings that are going to be ongoing during the whole period (i.e. months). Says there's no evidence the deal would fall through.

🧵33/X

CMA says that even if contractually Activision could get out of July 18, then if the CAT holds a hearing shortly after July 18, that contractual situation is the same and CMA says merger agreement will need an extension anyway, question is just how long.

🧵34/X

The CMA's conduct here--trying to stall, which the Court does not appear to be sympathetic to--does NOTHING to suggest that the theory of FTC and CMA colluding to slow-roll the deal and potentially derail it that way is wrong.

🧵35/X

Justice Smith wants to be clear he's not taking the position that there will be a trial in late July / early August, but IF IT CAN BE DONE, then Justice Smith thinks it should be done.

🧵36/X

Justice Smith says regulatory uncertainty should be removed, regardless of how the decision will ultimately go.

It seems to him "plain that uncertainty is a damaging matter" even if it cannot be predicted how that damage will arise. "Excellent reason" for moving swiftly

🧵37/X

Justice Smith on judgment that follows any hearing: he wants to hand down a judgment during the course of the summer, and not just in October or so!

🧵38/X

Justice Smith: for all those reasons we ought to TRY for those date (i.e. late July start of hearing).

Now talking about roadblocks, asking MSFT a question now about expert reports.

🧵39/X

CMA lawyer Williams now wanted to talk again before MSFT would be asked that question.

🧵40/X

Justice Smith wants everyone to leave the courtroom today with a "fortnight" period in mind, but how concrete within that period is another question.

Justice Smith wants to focus on question of fairness.

🧵41/X

Justice Smith would like to go over the practical roadblocks he's identified with Microsoft, but CMA still wants to argue here before that even happens.

🧵42/X

CMA coming up with EXCUSES, EXCUSES, and EXCUSES, such as that they can't instruct suitable counsel for this matter in time.

Their #1 strategic priority is to slow-roll the deal hoping it falls apart. Justice Smith is NOT IMPRESSED with that counsel-related argument!

🧵43/X

Justice Smith says availability of counsel arguments will receive "similarly short shrift", regardless of which side they come from.

Justice Smith stresses again: certainty is necessary for all concerned. He focuses on how the court can provide certainty ASAP.

🧵44/X

Justice Smith says things will get even more difficult for the court if talking about September or so. That has to do with other cases etc.

🧵45/X

Daniel Beard KG agrees with court that counsel convenience is NOT a priority in a matter like this.

🧵46/X

Report on U.S. law is on interpretation of relevant agreements and CMA wrongly made assertions about those contracts WITHOUT getting U.S. law evidence, and MSFT will show to CAT that the CMA simply made a mistake that way. CMA made assumptions under U.S. law, no evidence.

🧵47/X

So MSFT has a report from an expert in U.S. law that shows the CMA's assumptions were simply wrong.

🧵48/X

MSFT counsel says IT CANNOT BE that the CMA should be afforded longer (for its reply) than the appellant (MSFT) was: 4 weeks.

🧵49/X

Justice Smith says he read the decision AGAIN over the weekend. So he's already spent some time looking at this. Justice Smith says he didn't discover any areas that would take the CAT outside its comfort zone if it had to decide itself without economic expert evidence.

🧵50/X

Justice Smith notes that the CAT is "an economically literate tribunal". That's true: they deal with competition cases all the time and their website also stresses the court's economic (not only legal) expertise.

🧵51/X

MSFT counsel says economic expert evidence shows in context of this particular case what mistakes the CMA made with respect to market definition, and an independent economist could spell it out better than if the party made it as a submission.

🧵52/X

MSFT counsel: if court says they understand it all, then MSFT recognizes they can deal with it by way of submission, but "because these are massive", technical competence would be of assistance here.

🧵53/X

Justice Smith says he doesn't spend much time playing Xboxes, PlayStations, Switches. Distinction between playing on those platforms vs. cloud gaming is a difficult topic. Doesn't mean he has doubts about the appeal -- question is just what expert evidence to provide.

🧵54/X

Justice Smitih doesn't want to ask for too much material, also considering the Judicial Review ("JR") standard: and this hearing already shows that so-called experts quoted in the media and active elsewhere were WRONG when they suggested the CAT wouldn't dig deep here.

🧵55/X

Justice Smith is very much interested in getting market definition right. That's always the first major question in antitrust cases. And whether or not the CMA is right about its perspective on technology, he wants to understand what exactly the CMA meant.

🧵56/X

This is now a "gut feeling" but to me it very much seems that Justice Smith sees that there are issues with the CMA decision, at least issues in the sense of him not being convinced based on just reading the decision. In other words, the CMA decision is NOT COMPELLING!

🧵57/X

The partly incompetent, partly agenda-driven people who said this appeal was a long shot have ALREADY been proven wrong by how the discussion went today.

This is FAR from a slam dunk for the CMA, and the court is clearly sympathetic to the idea of moving swiftly, too.

🧵58/X

Professor Scott Morton explains in an expert report that even exclusivity (of a title to a platform) is NOT necessarily foreclosure. MSFT's counsel can do that as legal argument, but would prefer to be able to make reference to such an economic expert report.

🧵59/X

The first hour was A DISASTER for the CMA.

Justice Smith wants to move swiftly, CMA is stalling and it's easy to see. I see stalling tactics all the time across jurisdictions and judges identify them easily.

Biggest problem for CMA: Justice Smith unconvinced by decision

🧵60/X

It actually looks like MSFT doesn't really need to introduce much expert evidence etc. as far as Justice Smith is concerned. BUT I understand why they still want to do that:
1. There'll be two more panel members.
2. "Bench read" is no substitute for final decision.

🧵61/X

CMA now talking about market definitions. Their lawyer Williams says he's only been involved for a couple of days. Well, MSFT clearly announced on the day of the decision that it would appeal. CMA had enough time to get counsel up to speed! Their stalling is STUPID.

🧵62/X

Looking at body language, including but not limited to mimics, the CMA folks there are quite displeased with what they hear from the court.

They are now staring into the JAWS OF DEFEAT.

🧵63/X

The CMA's appellate team probably knows that it has a "mission impossible": they have to defend a decision that is indefensibly wrong. And they're facing some of the best lawyers in their country.

The court hasn't prejudged the case, has read the decision MORE THAN ONCE.

🧵64/X

CMA says there are serious questions about admissibility of much of the material submitted by MSFT.

Obviously they were going to also raise admissibility arguments, especially because they COULD NEVER win on the MERITS here.

🧵65/X

CMA says a lot of MSFT's submission looks like "comment and argument" and says it's just a "platitude" when MSFT argues that the expert material it could provide would be useful.

🧵66/X

Justice Smith says "yet to be appointed" other panel members, so it's not been formally decided who will join him.

🧵67/X

It seems Microsoft would be willing to forgo the opportunity to present certain evidence in the interest of time, but MSFT's counsel obviously argues that the evidence would be helpful to the court and the CMA could be reasonably expected to respond to it quickly.

🧵68/X

MSFT says if CMA makes unreasonable objections, they'll oppose, but otherwise they're prepared to do what's needed to ensure the deal doesn't get derailed.

🧵68/X

Bad for the CMA: there's really a meeting of the minds here between MSFT and Justice Smith with respect to how and how urgently to approach this. Not in terms of agreeing on all details yet, but they are philosophically aligned.

CMA again the outlier. Now with stalling.

🧵68/X

CMA lawyer Williams is STUTTERING now all the time.

By contrast, Daniel Beard KC has not even come close to stuttering.

🧵69/X

No lawyer I've ever seen in courtroom action in a high-profile case ever stuttered like this one.

🧵70/X

"and and and really..."

"so so just just as a matter of principle"

🧵71/X

"an independent expert or or or an internal expert but but the point we were making there"

🧵72/X

Justice Smith says he would not have a problem with the economist being involved in the CMA decision being called to explain his or her take on the expert material.

So that hearing could be pretty much like the CMA being on trial as a defendant.

🧵73/X

Now that you read and/or hear that, ask yourselves:

Were the so-called experts or self-declared professionals right who said that this appeal was going to be a very long shot?

🧵74/X

MSFT counsel says economist working for CMA could have all sorts of points of views that are not reflected in the decision itself in case the inquiry group didn't agree with them.

🧵75/X

Justice Smith just referred to "9-week run to hearing", so it seems he really very much wants that CAT hearing to start in late July.

🧵76/X

CMA may get some extension of four-week period to respond to the appeal even with the goal being a late July hearing.

🧵77/X

They're taking a break now.

So far this has gone GREAT for Microsoft's appeal.

The CMA is losing this. Its decision is indefensible, its stalling doesn't exude confidence, and its lead counsel plays two to three leagues below the one of Daniel Beard KC.

🧵78/X

Hearing continuing. CMA lawyer stuttering just like before the break, but he's received some instructions in the meantime he says.

🧵79/X

Justice Smith wants to understand the technical aspects, such as of why cloud gaming is a market of its own and gamers can't just decide to play locally (didn't say that now after the break, but that's the context).

He's a patent judge. CMA can't fool him on technology!

🧵80/X

The technical aspects are not being discussed now, but the question is what role technical and economic experts will play in the further proceedings.

Justice Smith wants to find the best solution for this particular case.

🧵81/X

The information density of what the CMA lawyer says is really low.

🧵82/X

So they're now talking about a 2nd case management conference between now and the "final" hearing after which the CAT will rule.

🧵83/X

It seems the CMA is now trying to just get more time for its response to the appeal. They may have understood already that the court is not going to be dissuaded from starting the hearing in late July.

🧵84/X

CMA lawyer talking about hypothetical scenario in which CMA made an "incontrovertible error" and then they'd like to be able to use expert testimony to defend their position, not just internal evidence.

🧵85/X

The stuttering has reached new heights.

🧵86/X

MSFT points to statements from THIRD PARTIES: cloud-gaming providers who DISAGREE with the CMA's definition.

Says the EC came out with different conclusion on that.

🧵87/X

So some of the evidence here will relate to things that the CMA declined to take into account.

That of course weighs against the CMA's claim that they need a lot of time to respond. It's not like the CMA has to deal with whole new questions here.

🧵88/X

CMA lawyer just talked over the judge, several times in short succession. Justice Smith explaining to him he can always make any appropriate points as he disagrees with Microsoft's counsel.

🧵89/X

Justice Smith says it would be "positively counterproductive" to bring in a new independent expert to defend the CMA decision, but more helpful to just ask the ones who were involved with the decision how they got there.

🧵90/X

The CAT will either have an economist on the panel of three OR the panel will be assisted by a CAT economist.

🧵91/X

MSFT counsel counters CMA argument that all sorts of challenges are due to how MSFT structured its appeal. MSFT counsel says MSFT had to do so because of the CMA's errors.

🧵92/X

The hearing will take place the weeks of July 24 and July 31, but the court may not need all 10 working days of that two-week period. Justice Smith thinks 10 days would be a dramatic overkill, 6-day hearing would be significantly longer than the 4 days MSFT proposed.

🧵93/X

Today's case management conference did not dissuade Justice Smith from that schedule.

He says he's carefully listened to the CMA's argument and respects what they said, but still feels it can be done. But if necessary he might postpone the hearing or give MSFT a choice:

🧵94/X

There'll be a second case management conference on June 12 and it could be that MSFT will be told that they can have the late July/early August hearing if they drop some of the evidence they'd like to present, or they present it and the hearing gets postponed.

🧵95/X

So the CMA has not been able to convince the court that the hearing could not or should not take place in late July/early August. But MSFT may have to sacrifice some of the evidence it would like to adduce to keep that schedule. That, however, is not certain yet.

🧵96/X

MSFT will make submission in coming days, and would like CMA to respond by June 7, concerning disclosures. That means the need for the CMA to disclose to MSFT's lawyers some of the evidence it relied on in its decision but didn't show them.

🧵97/X

That is different in other jurisdictions. In the U.S. the regulators must put all of their evidence on the table at a trial. The EC sometimes receives evidence with confidentiality restrictions and then explains that it can't use it to defend its decisions on appeal.

🧵98/X

Justice Smith is not inclined at this point (unless MSFT still convinces him) to order the CMA to disclose its communication with other regulators. He'd like to focus just on what the CMA did in its own decision.

🧵99/X

Justice Smith wants to minimize distraction for CMA in the weeks ahead because the June 12 case management conference is important to him, and wants CMA to focus on responding to the appeal.

🧵100/X

Activision Blizzard's role is still not totally clear, but it appears that they have filed an appeal and are not just an intervenor. Justice Smith assumes there'll be close coordination between MSFT and ATVI counsel.

🧵101/X

MSFT counsel clarifies interest in communication with other regulators: not so much about what CMA told other regulators, but what those other regulators told the CMA. Mentions EC now and would like to see what EC & CMA discussed re. market definition.

🧵102/X

So the people who took the EC's statement about "same conclusion" out of context (it was actually just about dismissing the console theory in both UK & EU) missed the key point: EC presumably told CMA ahead of decision that its cloud gaming market definition was wrong.

🧵103/X

If the CMA's market definition is deemed erroneous, that finding would have repercussions. It would affect all grounds of appeal, also remedies because:
broader market means lower market share and less market power, ultimately even has bearing on remedies!

🧵104/X

Activision lawyer: largest and highest-profile merger appeal ever to come before the CATribunal.

Says apparent lack of urgency on CMA's side is depressing. Regulator should be concerned with resolving this quickly. I agree with him!

🧵105/X

Activision lawyer also implies the CMA should simply have looked for appellate counsel a long time ago.

Notes the CMA responded with 500 pages of legal authorities (i.e. precedent, literature etc.), so he says CMA is more focused on law here than on facts.

🧵106/X

OK so now Activision's lawyer says they're presently the only INTERVENOR.

So Microsoft is the appellant, Activision the first intervenor and potentially others could appear.

Finally clarity on that one!

🧵107/X

ABK lawyer: unlike any other (potential) intervenor, they were involved with the CMA investigation throughout the process.

🧵108/X

ABK lawyer notes again ABK's position not to put certain titles on cloud. On that basis, there cannot be a competition issue, he says.

🧵109/X

ABK lawyer alleges "pretty stark procedural unfairness" by the CMA!

🧵109/X

ABK lawyer refers to Meta-Giphy case and "novel market". MSFT & ABK say it's not a separate market at all. Again mentions procedural unfairness re. treatment of evidence regarding the counterfactual (i.e. if CMA had asked itself what could go wrong if CMA was wrong).

🧵110/X

Formally ABK needs permission to intervene. I have no doubt they will get that permission. In their argument for that permission, they now explain some of their key arguments fo overturning the CMA decision and why they're best-placed to make certain contributions.

🧵111/X

ABK will explain what its responses would have been, and there is a witness statement by Bobby Kotick that forms part of the material supporting Microsoft's appeal.

🧵111/X

ABK now discussing switching between cloud streaming and native gaming. That is key to market definition: substitutable products/services are simply in the same market. So if people can just switch between certain products, the market is broader than otherwise.

🧵111/X

ABK: cloud gaming is nothing more than simply a delivery mechanism. A mechanism for delivery to the player. It is not a separate market.

🧵112/X

"unworldly analysis" ABK lawyer says of CMA. Vast majority of CMA investigation -- 28 weeks -- were devoted to FIRST concern (i.e. consoles). Only the back end of the 32 weeks dealt with the cloud story.

🧵113/X

ABK now makes an argument that if the CMA found there was no foreclosure risk in consoles (when they had to revise the provisional findings), they can't just assume the opposite in cloud gaming.

🧵114/X

ABK: CoD is a popular game, but it is not so successful that if it were withheld from other providers, they would not be able to compete with the enlarged (by the deal) Microsoft.

🧵115/X

ABK lawyer talks about remedies now. EC disagrees with CMA, ABK was directly involved in "deficient process": there was procedural unfairness in remedies context.

🧵116/X

We now know that the EC also disagreed with the CMA on the relevance of those 10-year streaming agreements with Nvidia, Boosteroid etc. and ABK wants to explain that those are BINDING LEGAL contracts with SOPHISTICATED parties.

🧵117/X

"Real hard-nosed commercial bargain", the agreements between Microsoft and those third parties. Uncommercial, unreal, unworldly, and wrong that CMA didn't give weight to those contracts.

🧵118/X

ABK proposes shortening the response times for the CMA to all sorts of things such as to any new interventions.

🧵119/X

Mentions Bobby Kotick's witness statement again. ABK position is that it's important evidence. Goes to counterfactual what ABK would've done. Explains ABK's steadfast position on cloud gaming. Says CMA was procedurally unfair in that regard, too.

🧵120/X

Bobby Kotick stands ready to answer questions. Would be unusual at this stage of proceeding, but they offer it.

🧵120/X

ABK appreciates this appellate process will overrun the July 18 date. Can't comment on what the parties will discuss WRT that deal date, but the parties are sophisticated and have the point well in mind. This can't go on forever, these people are sensible, commercial.

🧵121/X

Justice Smith would like to know how they would practically organize things between MSFT and ABK, such as whether there would be some formal notice of ABK taking the lead on e.g. Ground 3.

🧵122/X

oeclaw.co.uk/barristers/pro…

This Lord Grabiner KC delivered oral argument for ABK today. Lord Pannick KC was sitting next to him I believe.

🧵123/X

Justice Smith's decision to hold a case management conference on June 12 keeps up the pressure. It's not impossible that the 2nd CMC might lead to a postponement of the hearing, but my feeling is that the hearing will start the week of July 24.

🧵124/X

Anyone asking to intervene (besides ABK, which has already asked for it) will be given DAYS NOT WEEKS to put in a full statement, Justice Smith says.

🧵125/X

So ABK has a permission to intervene with sort of a "clawback". So there are some questions left to discuss, but in principle, ABK is on board.

🧵126/X

Justice Smith wants to put confidentiality/disclosure discussions on hold because they have "bigger fish to fry" for the time being.

🧵127/X

It's a wrap: almost 4 hours.

CMA is losing!

I know that countless questions were asked. Please let me first get something to eat. I even had to rebook a flight to be in front of my computer in time for the hearing.

I can't answer a huge number of questions individually. But… twitter.com/i/web/status/1…