In our previous GamePolitics story we described how the Federal Trade Commission went to U.S. District Court in an attempt to force Grand Theft Auto IV publisher Take-Two Interactive to cooperate in an anti-trust investigation related to Electronic Arts' potential takeover of T2.
So, why would Take-Two thumb its nose in the government's face, even to the point of reneging on previously agreed-upon conditions?
We asked financial analyst Michael Pachter (left), who covers the video game sector for Wedbush-Morgan:
I think that the reasons range from A) being incredibly savvy and holding off the FTC as a tactic to slow the process to Z) being incredibly arrogant.
It's hard to know where Take-Two fits on the scale from A to Z. Their general counsel is pretty experienced, and it surprised me that he would allow the company to deal with a subpoena this way. The FTC's action of seeking a court order is pretty severe, and shows how seriously the FTC takes this slight.
I'm not sure what Take-Two hopes to gain from this, other than the obvious delay to the process. However, the process won't be delayed if Take-Two's failure to comply with the subpoena results in the FTC granting approval without looking at these documents. There is NOT a presumption of anti-competitiveness, and if EA demonstrates that the combination would not be anti-competitive, Take-Two would be better served to provide evidence to the contrary if it wishes to remain independent.
It seems to me that they would be best served by cooperating fully with the FTC, and by pointing to records that show how competitive their business is with EA's business. Apparently, they have reached a different conclusion.
UPDATE: So, what's to be gained by delaying? We put that question to Pachter as well:
I think it's always in their best interest to buy more time. Management has an incremental 720,000 shares of restricted stock that vest if the takeover happens after March 31, 2009. More time buys them a greater ability to prove the impact that they've had on the company, and they appear sincere in their belief that they have turned Take-Two around. More time allows Activision to close its Vivendi deal and give Take-Two a look. Ubisoft might be interested...