FTC issues Second Request in Sony's $3.6 billion Bungie deal

The Federal Trade Commission has issued a Second Request into the Sony-Bungie deal.

The FTC is currently reviewing Sony's proposed $3.6 billion buyout of Bungie. Reports indicate that this review has advanced into the third phases of standard M&A procedures with the FTC issuing a Second Request.

This essentially means the FTC requires more information and data from both Sony and Bungie before it agrees not to oppose the deal.

"Reporters often also write when a second request is issued (see Sony-Bungie news) because that indicates the agency may have concerns with a deal or that they wants to look hard at developments in a particular industry," said Bloomberg analyst Leah Nylen.

As Hoeg Law notes, this Second Request is likely because the FTC wants more data on the games industry and its markets as a whole, which it can then use as a baseline of understanding for Microsoft's $68.7 billion mega-buyout of Activision-Blizzard.

Per the FTC's website, these types of deals can have up to five steps:

1. Both parties create a filing
2. Deal is handed to either FTC or DOJ for review
3. Deal is passed or agencies issue Second Request
4. Both parties comply with Second Request, agency reviews data for 30 days
5. Agency lets the deal go through or opposes it in court

As per the Hart-Scott-Rodino law, mergers and acquisitions of specific sizes and value must create a filing of their deal. Thresholds are outlined in Section 7A of the Clayton Act.

This filing is then given to either the FTC or the Department of Justice for review. The departments review the deal, which includes public data, and if there are still questions, the agencies can issue what's called a Second Request.

This is a request for more information from both parties, which can include sales data, KPIs, reports, and non-public data. The FTC or DOJ have 30 days to review the Second Request data--extensions can be filed if need be.

Once the information is reviewed, the agencies can respond in three different ways:

1. Not objecting to the deal, in which the deal will go through
2. Issue provisions and changes to the deal, in which both parties can make adjustments
3. Oppose the deal with a court order (such in the case of NVIDIA's proposed buyout of ARM)

Under the Biden Administration, the FTC's chairwoman Lina Khan has promised to crack down on big tech mergers and aggressively scrutinize multi-billion deals for signs of anti-competitive or anti-consumer practices. Case in point: The FTC sued to counter NVIDIA's buyout of ARM, which was eventually cancelled.