Litigator of the Week: Beth Wilkinson Takes the Lead for Microsoft in Fending Off FTC Challenge to Activision Deal
Need proof that Beth Wilkinson’s 40-lawyer boutique Wilkinson Stekloff is the legal equivalent of an elite special ops unit?
When Microsoft Corp. faced a courtroom showdown with the Federal Trade Commission in a challenge to its largest ever acquisition—the $69 billion deal to acquire “Call of Duty” maker Activision Blizzard—the company turned to Wilkinson and her team.
After a five-day evidentiary hearing late last month, U.S. District Judge Jacqueline Scott Corley in San Francisco this week denied the FTC’s bid for an injunction to block the deal. She found the agency hadn’t proven that Microsoft would likely pull “Call of Duty” from Sony’s PlayStation “or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets.”
Litigation Daily: How do you characterize what was at stake here?
Beth Wilkinson: This was the largest merger in tech history, valued at $69 billion and facing unprecedented regulatory scrutiny despite the fact that the industry is dynamic, extremely competitive, and ever-changing. In one sense, at stake was whether the government can block a deal when there is a commitment to make the most valuable assets available to competitors. In a broader sense, the question came down to whether the government can block a deal because of the prominence of the parties and the amount of money involved, even when it’s clear the deal will not harm competition.
How did this matter come to you and the firm?
I received a call from Jon Palmer, the head of litigation at Microsoft, the day after the deal was announced, and we started the next day. He and the folks at the company understood that you don’t wait to see if a complaint is filed to prepare for litigation. They understood the importance of developing a clear, consistent, and straightforward narrative. By bringing us in early, Microsoft gave us time to learn from and get to know the executives, develop and work closely with the economic experts, and integrate with the entire legal team handling the transaction. It was a brilliant move on Microsoft’s part and turned out to be one of the main reasons we were able to try the case with only ten days’ notice.
Who was on your team and how did you divide the work? And how would you characterize the working relationship with members of the team at Weil Gotshal, Sidley Austin, and Skadden Arps?
When I founded the firm, I knew you didn’t have to be big to get the best work; you need to have the best people and you need to believe in them. We had a terrific team of associates, paralegals and staff who made it all possible. Five attorneys from the firm examined witnesses at trial—Rakesh Kilaru, Kieran Gostin, Grace Hill, Anastasia Pastan, and myself. Another key member of our team, Sarah Neuman, who had twins in February, and came back from maternity the month of trial to rejoin the case. As a small firm, it was particularly important that we worked closely with all of the law firms and together we were a terrific virtual law firm. Weil was in charge of all the regulatory aspects of the case, Sidley drafted briefs, findings of facts, and conclusions of law, and Skadden ably represented Activision. The people we worked with were fabulous, and it was a true team effort.
How much did you know about the video gaming industry before getting involved here? What were the crucial elements to understand about the industry for this particular matter?
Let’s just say I’m not a gamer. My youngest son plays “Call of Duty” and Madden, and he was quite surprised his mom was working for Xbox. Thankfully Phil Spencer, Sarah Bond, and their team patiently taught me about the business. It’s a fascinating industry, and I now talk about it endlessly with my son.
What were your key themes and how did you try to drive them home with the court over the course of the evidentiary hearing?
Our case was simple: From day one, Microsoft and Xbox wanted to acquire Activision to provide more games to more people. The deal was good for gamers and good for business. Xbox always intended to distribute “Call of Duty” on as many platforms as possible. They turned their words into actions by offering the market leader, Sony, a 10-year agreement, and signing contracts with Nintendo and five cloud-streaming companies to ensure “Call of Duty” would be available to hundreds of millions of gamers. It was rewarding to read Judge Corley’s opinion and see our themes and key facts sprinkled throughout her decision.
During the course of the trial, Judge Corley told the FTC’s lead lawyer “In many ways you won” in regards to the pledges to keep “Call of Duty” available on other non-Microsoft gaming platforms post-merger. The FTC's lawyers didn't agree, but what do you make of the judge's assessment?
Judge Corley was right. When the regulators raised issues, Microsoft responded and made changes. The only regulator that has been unwilling to accept any of those solutions is the FTC. Brad Smith, the president of Microsoft, said it best: Do you want to be the person who tries to find solutions to any problem, or the person who finds problems with every solution?
Where does this leave things in terms of the merger? How are you and your firm involved in the matters that remain pending?
When Judge Corley denied the FTC injunction, she set a deadline to end the TRO at 11:59 pm Friday night. We were surprised when the FTC filed a notice of appeal to stay the transaction. We are working with our colleagues to oppose. We believe the judge’s ruling was thoughtful, supported by overwhelming evidence, and correct. We will continue to fight for Microsoft and Activision until the transaction is completed.
What will you remember most about your work on this matter?
At the end closing argument, Judge Corley went out of her way to compliment both sides for the advocacy she had witnessed. She noted how many attorneys had examined witnesses, and told our clients how it had benefited their cause. Those comments spoke to me about the skill, diversity, and depth of talent at our firm and told me that we have built something special since we opened in 2016.