Take-Two Plays Hardball with the FTC

June 17, 2008 -

Things are beginning to get ugly between Take-Two Interactive and the Federal Trade Commission.

Attorneys for Take-Two have strongly disputed the FTC's contention that the Grand Theft Auto publisher is stonewalling the government agency's investigation into antitrust aspects of the potential EA merger (see: FTC Hauls Take-Two Into Court Over EA Takeover Bid).

In a document filed yesterday with the U.S. District Court in Washington, D.C., Take-Two fires back at the FTC:

No one at Take-Two Interactive Software, Inc. (“Take-Two”) is seeking to thwart the proper investigation by the Federal Trade Commission (“FTC”) staff of Electronic Arts, Inc.’s (“EA”) tender offer. On the contrary, from the outset, Take-Two has fully cooperated with these efforts, already having produced more than 479,000 pages of responsive documents through the date of this Opposition.

 

The issue before the Court is how the seemingly boundless desire of a government agency for information can be contained in order to save a company from the ruinous costs of compliance with a subpoena that requires it to search virtually every electronic and paper document in its possession, and to make available most of its senior executives for investigational hearings (pre-complaint depositions) in a situation where the company is not even a willing party to any transaction being investigated and where it is quite possible that no such transaction will ever occur.

 

 In the lengthy filing, Take-Two claims that it has been bending over backwards to meet the FTC's demands, including keeping a team of attorneys working over the recent Memorial Day weekend in an effort to supply requested internal documents. Referring to the FTC's conduct as an "abuse" at one point, T2 goes on to assert:

The FTC fails to engage in any meaningful analysis, in either its negotiations or motion papers, of its specific requests. It refuses to acknowledge that compliance with all of its requests would require a comprehensive, company-wide review of Take-Two’s data and documents, which encompass a huge universe of information...

A seperate declaration from a Take-Two attorney claims that it costing the company $50,000 per day in legal bills to meet the FTC's requirements.

Take-Two also submitted a slew of exhibits to the Court. Although no trade secrets are revealed in the publicly-viewable documents, it's clear from their context that the FTC is probing the workings of the "pipeline" by which T2 gets its sports games to market. The company also provided data on its exclusive licensing arrangement with Major League Baseball (MLB 2K8 screen at left) as well as NPD sales data for its sports games from 2001-2007.


Comments

Re: Take-Two Plays Hardball with the FTC

I'm all for freedom of ttnet vitamin speech and allowing rent a car game makers to put whatever they want in games, but there's one thing about this app that has me scratching my head.  Correct me if I'm wrong, but from araç kiralama the previous article araba kiralama on this I gathered that players can use Google maps in-game to find the other (real-life?) dealers in their area.  If this is the case, has travesti anyone considered what's stopping someone from using this app to actually move drugs between hands for reals?

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Re: Take-Two Plays Hardball with the FTC

There point in the legal documentation also seems to read between the lines of, "We gave you all this information and you need more why?"

Has the FTC given specifics on what exactly they're trying to accomplish with this investigation?  I know from my own experience you don't give a government agency anymore information than exactly what they're entitled to.  The more info you give typically a government agency then comes back and asks for more.

If a merger was already going through between EA and Take-Two I'd see this as Take-Two being jerks, but that isn't the case, so I'm going to have to side with Take-Two on this one.  It looks like FTC is trying to do EA's homework for them and be a royal pain to boot.  It would honestly be awesome if Take-Two brought a lawsuit against the FTC for costs associated with the research done. 

-Loudspeaker
"Volume helps to get a point across but sharp teeth are better."

"Volume helps to get a point across but sharp teeth are better."

Re: Take-Two Plays Hardball with the FTC

I wonder how much EA is paying the FTC. Heh

Re: Take-Two Plays Hardball with the FTC

I can see where they are coming from. The hostile takeover is being investigated by the FTC, and the FTC is demanding all these documents. T2 gave them a ton of stuff and they keep asking for more, and there bottom line is:

"We've given you a ton of stuff you asked for, and now you are asking for more. This is costing us a lot of time and money, and we don't even want this to move forward. Why don't you just save us some time and not allow the merger? That would suit us down to the floor."

Re: Take-Two Plays Hardball with the FTC

I boycotted T2 and Rockstar for a long time before Zelnick took over and cleaned up their act. They were pretty sleazy and I couldn't justify giving them any money. As a result I missed out on a lot of really good games, like Bully and GTA: San Andreas.

But I gotta say...  Man, I love how Take Two doesn't take shit from NOBODY!

Re: Take-Two Plays Hardball with the FTC

From what I understand (and this is potentially flawed so if I'm wrong, someone please correct me) Take Two can't just say no because they don't own the majority of the stock. My guess is that they've sold more than 50% of the company value in shares and thus the combined shareholders have majority control, TT are appealing to shareholders to not sell to EA because they don't have direct control over the matter.

 

Also: TT submitted nearly half a million pages?? Geez they seem to have learned one thing from thompson. Hopefully they were polite & environmentally conscious enough to send it by email rather than fax.

Re: Take-Two Plays Hardball with the FTC

Or it could be that they don't want to be the next fax machine murderer. >_>

Re: Take-Two Plays Hardball with the FTC

Riddle me this, Batman:  Why is Take-Two being forced to make itself available for purchase against its will?

Why is it they can't simply say "no deal," and that's the end of it?

Re: Take-Two Plays Hardball with the FTC

Glad I am not the only one having formating problems with this new system.

It's all about getting a monopoly on Sports Franchises

It seems obvious that the majority of the FEC concern is that it would give EA a virtual monopoly on sports games in the US.  Based on the documents requested, their concern really seems to have almost nothing to do with Rockstar or GTA. 

When one considers that sports franchises EA currently has, this is a very legitimate concern.

Were I the FEC, I wouldn't allow the purchase unless EA agreed to divest of some of their sports franchises or if the purchase didn't include the Take Two Sports portion of the business.

My personal opinion is that the only reason EA is interested in Take Two is their sports market.  This would give EA a near monopoly and allow them to save a lot of money in the development of new sports titles. 

Unlike a typical monopoly, this buyout wouldn't let EA unilaterally raise prices.  It WOULD allow them to drastically cut costs.  They wouldn't have any competition to keep up with.  There would be no reviews saying their game sucked in comparison to XYZ's game.  They wouldn't have to innovate, they could get even more lazy about year-on-year updates than they already are.  Owning Take Two sports could save EA a lot of money.

I think EA's motivation has SO little to do with Rockstar and GTA, that were the FEC to tell EA they could have Rockstar, but couldn't have Take Two's sports franchises, EA would RUN like hell from this buyout.  There's going to be an open bidding war for the Housers in a year's time.  There's no guarantee EA would be the top bidders.  Buying Take Two for Rockstar alone just doesn't make any sense. 

It's all about getting a monopoly on sports franchises.
 

Re: It's all about getting a monopoly on Sports Franchises

I highly doubt this is about getting the sports division.  Take-Two themselves has said that the sports division hasn't been profitable for a long time.  EA likes money and having a monopoly over sports games that already don't make money for the competition doesn't make sense.  They want Rockstar.  Rockstar prints money and is a far bigger potential profit generator for EA than the sports division.  Spending $2B to acquire a competitor that's barely competing doesn't make sense.

Re: It's all about getting a monopoly on Sports Franchises

2K Sports may not have been doing all that well, But You can say Madden, MLB, FIFA, NHL, and NBA aren't.   And they could be doing a lot better without 2K releasing rival games at $29.99, sometimes even beating them to market.

The biggest thing 2K does for EA is make all of EA's existing sports lines more profitable.  With no other competition to speak of in the sports game market, they can put less effort (if that's possible) into their yearly updates and keep their games at $59.99.

Rockstar is just a bonus, yeah they can get huge numbers once every three years, but the sports games for EA are a yearly paycheck and put up good numbers.  Although I wouldn't put it past them to start releasing GTA with a year at the end of the name, simply changing the character names every year.

Re: It's all about getting a monopoly on Sports Franchises

The Houser brother ARE Rockstar, and their contract is up next year. Lots and Lots and Lots of companies have tried to replicate the GTA franchise, none have fully replicated GTA's success. The Housers have the sandbox drama down.

There will be a bidding war for their services when their contract expires not too long from now in 2009. If EA's true interest was GTA, they'd be crazy to buy T2 now. They would wait until T2 signed a new long term deal with the Housers.

If EA buy T2, why would the Housers stay with EA? EA has been THE WORST publishing house in the world for allowing developer independence. If EA takes over, there will be All Kinds of bidders for the Housers. So if EA strikes, the Housers are probably gone.

As for Take Two Sport's lack of profitability, it just doesn't matter.

Say you own a gas station. Then one day a competetor across the street starts selling gas for a LOT less than yours, way under cost.  Sure, he's losing All Kinds of money, but so are you.

Just because T2 Sports is losing money doesn't mean they aren't hurting EA.  With all that GTA money coming in, T2 Sports could keep chugging along making losses for years and years.  This is hurting EA, and it's why they're trying to stop T2 Sports in its tracks.

T2 Sports is the only other big player in the market and they are putting out games that make EA look bad. By integrating T2's sporting franchises into their own, EA can significantly reduce costs and expand their market at the same time.

Overhead from both sides will be trimmed, titles will be dropped or integrated, costs for both will be reduced. Then EA can make fewer sports games, they will spend less money developing each of those fewer sports games,and they won't have any competition so won't have to develop new features.  EA can then sell these cheaper titles to all the people who previously purchased the T2 Sports titles

EA makes a LOT of money on their sports titles. If they buy T2, EA will be able to make FEWER titles, that cost LESS to make, that sell MORE.

It's like printing money.

Re: It's all about getting a monopoly on Sports Franchises

The Houser brothers may "be" Rockstar, but they're not DMA Design. Things's can be quite frosty between DMA - sorry, Rockstar North - and the Houser brothers. I'm not saying I can conceive of a world where EA could buy Take 2, the hHousers leave but DMA remains intact, how ever I would say that the Houser's personal contribution to the quality of GTA from 3 onwards has been grossly overemphasised.

Re: Take-Two Plays Hardball with the FTC

Ah, so that's what a professional legal filing looks like.

 

I have to wonder, is the FTC requesting oodles and oodles of documents from EA as well?

 

Andrew Eisen

Re: Take-Two Plays Hardball with the FTC

I'm not entirely sure, maybe 95%, that that was directed at Thompson.

Just to be safe: Zing!

-"A fanatic is one who can't change his mind and won't change the subject." -Sir Winston Churchill

Re: Take-Two Plays Hardball with the FTC

I once worked in a law office that actually participated in the legal strategy of suing someone with limited resources and, rather than trying to win the argument in court, would just stall the process until the opposition ran out of money to pay their lawyers.

I quit that job.

While I respect and appreciate reasonable government oversight and regulation, I would be sick to my stomach if the FTC was complicit in the evolution of a business strategy that allowed a large company to threaten to buy out a smaller company, with the sole intent of causing the persuant FTC investigation to strain a competitor's resources.

I clearly don't have enough information to say for sure what's going on here, abuse by either EA or the FTC or rather insolence on the part of T2.

Re: Take-Two Plays Hardball with the FTC

From T2's point of view, I can eaily see why they're doing this. They're being forced to do all of the footwork for EA's takeover bid when they have, seemingly, no intention of allowing it to happen. And because they're having to do all the footwork, its costing them a lot of money while EA gets to sit back and smile because with every financial setback T2 suffers, they come closer to achieving that takeover.

Re: Take-Two Plays Hardball with the FTC

Hack analysts will start saying this is all Take-Two's fault in 3...2...1...

Re: Take-Two Plays Hardball with the FTC

Have to say that if this is true then the FTC really are being unreasonable.  I can see why this would go to court to get a ruling.

Re: Take-Two Plays Hardball with the FTC

The cynic in me has to wonder if somehow the EA has 'encouraged' the FTC's investigatioin in an attempt to put financial strain on Take-Two and make their offer seem more appealing.

Re: Take-Two Plays Hardball with the FTC

Meh. Investigation*

Re: Take-Two Plays Hardball with the FTC

This thing could get really ugly pretty soon. 

 
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MaskedPixelantehttp://www.joystiq.com/2014/04/18/playstation-99-cent-sale-discounts-tokyo-jungle-super-stardust/ Weekend long PSN flash sale. So much stuff is 99 cents for the rest of the weekend.04/18/2014 - 5:59pm
Adam802http://www.polygon.com/2014/4/18/5627928/newtown-video-game-addiction-forum04/18/2014 - 4:14pm
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MaskedPixelanteNumber 3: Night Dive was brought to the attention of the public by a massive game recovery, and yet most of their released catalogue consists of games that other people did the hard work of getting re-released.04/17/2014 - 8:46pm
MaskedPixelanteNumber 2: If Humongous Entertainment wanted their stuff on Steam, why didn't they talk to their parent company, which does have a number of games published on Steam?04/17/2014 - 8:45pm
MaskedPixelanteNumber 1: When Night Dive spent the better part of a year teasing the return of true classics, having their big content dump be edutainment is kind of a kick in the stomach.04/17/2014 - 8:44pm
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IanCErm so they shouldn't sell edutainment at all? Why?04/17/2014 - 4:42pm
MaskedPixelanteNot that linkable, go onto Steam and there's stuff like Pajama Sam on the front-page, courtesy of Night Dive.04/17/2014 - 4:13pm
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MaskedPixelanteAnother round of Night Dive teasing and promising turns out to be stupid edutainment games. Thanks for wasting all our time, guys. See you never.04/17/2014 - 3:44pm
Matthew WilsonAgain the consequences were not only foreseeable, but very likely. anyone who understood supply demand curvs knew that was going to happen. SF has been a econ/trade hub for the last hundred years.04/17/2014 - 2:45pm
Andrew EisenMixedPixelante - Would you like to expand on that?04/17/2014 - 2:43pm
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Matthew Wilsonok than they should not protest when the consequences of that choice occur.04/17/2014 - 1:06pm
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