Reuters is reporting that the Federal Trade Commission has initiated proceedings in U.S. District Court to compel Take-Two Interactive to respond to the FTC's subpoenas in relation to Electronic Arts' ongoing hostile takeover bid.
As GamePolitics reported last week, Electronic Arts placed its takeover on hold pending the FTC's review to determine whether an EA-T2 merger would violate federal antitrust laws.
GP is currently reviewing court documents. An affidavit by FTC attortney Reid Horwitz alleges that Take-Two reneged on agreements to provide documents requested by the FTC.
Horwitz also writes that the federal agency is particularly interested in the files of Take-Two CEO Ben Feder and Visual Concepts president Greg Thomas, along with several sales and marketing execs, one of whom was formerly the marketing VP for 2K Sports.
Given the government interest in 2K Sports and Thomas, whose studio creates most of T2's sports titles, it's clear that the FTC investigation is centered around a possible monopoly in sports games should the EA takeover occur.
While it may appear odd that T2 would balk at the FTC request, according to FTC attorney Horwitz, T2's position seems to be that it should not be burdened with providing the documents since it was EA that inititated the uninvited takeover attempt. T2 claimed to the FTC that it spent in excess of one million dollars in providing a limited amount of info to the agency.
Horwitz relates that, while T2 agreed to give up some of the requested employee files, it refused to provide files from CEO Ben Feder or Visual Concepts' Greg Thomas. When the FTC asked why, a Take-Two attorney replied:
These individuals were "creative types" who would leave the company rather than allow their files to be searched...
UPDATE: U.S. District Court Judge Henry Kennedy has apparently been persuaded by the government's position, and has ordered Take-Two into court on June 24th to show cause why he shouldn't rule in favor of the FTC.
UPDATE 2: A document filed by Take-Two with the Securities and Exchange Commission provides its comment on the FTC issue:
Prior to the issuance of the FTC’s subpoena and CID the Company has been cooperating fully with the FTC with regard to their review of EA’s Offer to acquire the Company. The Company has already provided enormous quantities of data and access to key executives, and has offered to provide the FTC staff with additional documents and information. Nevertheless, the Company believes the FTC’s subpoena
and CID are unnecessarily broad and would entail unacceptable additional expense to the Company. To limit the inordinate expense and labor that the FTC’s demand would entail, the Company has sought to obtain reasonable limits on the scope of the information sought. The Company will continue to cooperate actively and produce documents in response to the FTC’s previous requests, and will of course attempt to seek an acceptable resolution to this matter as quickly as possible.