U.S. Supreme Court Refuses to Block Microsoft-Activision $69 Billion Merger

An emergency appeal to the U.S. Supreme Court by a group of video gamers seeking to block Microsoft’s pending $69 billion purchase of publishing giant Activision Blizzard (publisher of Call of Duty) has been denied by the high court. An application for injunction ahead of the midnight termination deadline tonight had been submitted to Justice Elena Kagan, who denied it on July 18.

The denial comes on the heels of the Federal Trade Commission’s failed effort to block the deal last week when a federal appeals court judge in San Francisco denied the government’s request. It remains to be seen whether the FTC seeks alternative avenues to block the deal it said would pose an unlevel playing field to video game-playing consumers.

Tonight’s deadline is expected to pass with closing of the deal. An extension will likely be granted to deal with ongoing regulatory concerns in the United Kingdom. Should the deal fail, Microsoft is on the hook to Activision for a $3 billion break-up fee.

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DOJ Looking to End 1940s-Era Theatrical Movie Distribution Rules

The Department of Justice’s antitrust division is considering ending 1940s-era legislation that prohibits studios from owning movie theaters and controlling the exhibitor release slate, among other provisions.

Known as the Paramount decrees, antitrust efforts at the time led to the 1948 U.S. Supreme Court ruling against Paramount Pictures and other major studios that ended studio ownership of theaters and made it illegal for studios to mandate theaters screen all or none of their new releases, a practice known as “block booking.”

“As the movie industry goes through more changes with technological innovation, with new streaming businesses and new business models, it is our hope that the termination of the Paramount decrees clears the way for consumer-friendly innovation,” Makan Delrahim, the DOJ’s antitrust boss, Nov. 18 told the American Bar Association confab in Washington, D.C.

Delrahim led the Justice Department’s unsuccessful appeal of AT&T’s $85 billion acquisition of Time Warner, which led to the creation of WarnerMedia.

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The DOJ, which would have to file a legal court motion to reverse the law, is seeking a two-year sunset period on several elements of the decrees, including block booking and select license agreements, according to The Wall Street Journal, which first reported the government move.

Observers contend the move could expedite consolidation among the three largest theatrical chains: AMC Theatres, Regal Entertainment and Landmark Holdings, while likely putting smaller exhibitors out of business.

The theatrical business remains under siege by over-the-top video and market domination by Disney, which continues to rule the box office through its Marvel Studios, Pixar Animation and Lucasfilm releases.

Trade group the National Association of Theater Operators suggested a reversal of existing theatrical distribution rules would enable major studios to dominate exhibitor release slates.

“If exhibitors were forced to book out the vast majority of their screens on major studio films for most of the year, this would leave little to no room for important films from smaller studios,” NATO said in a statement.

U.S. Supreme Court to Hear Byron Allen’s $20 Billion Racial Discrimination Lawsuit Against Comcast

The U.S. Supreme Court has agreed to hear a $20 billion racial discrimination lawsuit filed by Byron Allen, CEO of Entertainment Studio and owner of The Weather Channel, against Comcast Cable.

Allen also co-owns with Sinclair Broadcast Group 21 regional sports networks acquired from Disney following its purchase of 20th Century Fox.

The suit, filed in 2015 by Allen and the National Association of African American Owned Media, alleged Comcast worked to keep black-owned media networks off its platform.

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The suit was dismissed in federal court and then overturned last November by the Ninth Court of Appeals in San Francisco.

Comcast, which appealed the ruling to the Supreme Court, denies it has engaged in a discriminatory manner, saying it carries more than 100 networks targeting diverse audiences.

“We believe the Ninth Circuit Court of Appeals decision was incorrectly decided,” Comcast said in a statement. “At this stage, the case is about a technical point of law that was decided in a novel way by the Ninth Circuit. We hope the Supreme Court will reverse the Ninth Circuit’s unusual interpretation of the law and bring this case to an end.”

Allen said Comcast upped its content diversity only after his litigation.

“This case is not about African American-themed programming, but is about African American ownership of networks,” said Allen. “Unfortunately, the networks Comcast refers to as ‘African American-owned’ are not wholly-owned by African Americans and did not get any carriage until I stood up and spoke out about this discrimination and economic exclusion.”

New Zealand Looking to Tax Web Giants Amazon, Google, Facebook

New Zealand Feb. 18 joined the European Union and Australia in seeking to tax Internet behemoths such as Amazon, Google and Facebook on revenue generated within its border.

Prime Minister Jacinda Ardern made the announcement in a post-cabinet press conference.

The proposed 2% to 3% tax would apply to any purchases and services sold by Internet firms regardless of their actual physical presence in the country.

“Some companies can do significant business in New Zealand without being taxed for the income they earn,” Ardern said. “This is not fair, and this is not sustainable.”

Indeed, Google’s subsidiary in New Zealand reportedly paid $393,000 in taxes in 2017 despite generating hundreds of millions in revenue.

The government said the tax could generate upwards of $55 million in additional annual revenue.

“Our current tax system is not fair in the way it treats individual tax payers, and how it treats multinationals,” said Ardern.

The move by New Zealand mirrors efforts in the United States by individual states such as South Dakota, which had its e-commerce tax lawsuit against online furniture retailer Wayfair reached the U.S. Supreme Court.

The high court last summer ruled states could charge taxes on companies doing business in the state without an actual physical presence.

A Georgia lawmaker this month proposed legislation seeking to tax digital entertainment services such as Netflix and Spotify 4% in an effort to compensate for declining pay-TV taxes statewide.

Such a user tax currently exists in Hawaii, Washington and Pennsylvania.

 

U.S. Supreme Court Refuses to Hear Net Neutrality Appeals Court Ruling

The U.S. Supreme Court Nov. 5 declined to hear a case brought by the telecommunications industry and the Department of Justice seeking to reverse a lower appeals court ruling upholding Obama-era regulations that treated the Internet as a utility.

The Federal Communications Commission under President Trump reversed the regulations in 2017. Through the Obama-era guidelines were no longer in place, the Trump Administration and telecoms were hoping the Supreme Court would remove the precedent set by the 2016 U.S. Court of Appeals for the District of Columbia Circuit’s ruling that upheld them.

The Supreme Court’s lack of action on the case does not reverse the 2017 repeal of the net neutrality guidelines enacted in 2015, and leaves the door open to future litigation for any net neutrality policy.

The FCC reversal had been seen as a win for major ISPs such as Comcast, AT&T and Verizon having greater control of content distribution on the Internet. Indeed, Dish Network this month alleged AT&T-owned HBO and Cinemax wouldn’t renegotiate pay-TV carriage agreements, in part due to AT&T’s competing over-the-top video distribution platforms.

California state lawmakers this year voted to adopt the guidelines affording content providers such as Google, Apple, Facebook, Netflix, Hulu and Amazon Prime Video equal access to high-speed Internet distribution without being subjected to throttling, blocking or paid prioritization by Internet service providers.

Enforcement of the new legislation – set to take effect in January – has been put on hold pending a separate lawsuit by the federal government that argues states seeking their own net neutrality guidelines are violating the supremacy clause.

E-commerce Takes a Hit as U.S. Supreme Court Rules in Favor of Sales Taxes on Web Merchants

The U.S. Supreme Court June 21 in a 5-4 decision ruled that states can levy a sales tax on products sold by e-commerce merchants regardless of a physical presence in the state. The decision is a multibillion-dollar windfall for states.

The ruling overturned a 1992 decision that held the Constitution barred states from collecting taxes on businesses with no physical presence within their borders.

That ’92 decision helped spawn e-commerce, which, spearheaded by Amazon and others, has hamstrung a brick-and-mortar retail ecosystem that is required to collect sales tax.

But in 2015, Justice Anthony Kennedy questioned the decision involving a North Dakota business. South Dakota responded by imposing a tax on all merchants that had more than $100,000 in annual sales or more than 200 individual transactions in the state.

The state then sued online retailers Wayfair, Overstock.com and Newegg for violating the rule. The case ultimately wound its way to the U.S. Supreme Court.

The decision is seen as major hit to e-commerce behemoth Amazon, which charges sales tax on items it sells directly, but not on those sold by third-party retailers. In 2017, Amazon reportedly generated nearly $32 billion in revenue from third-party sellers — more than it generates from Amazon Web Services.

 

U.S. Supreme Court to Punt E-commerce Sales Tax Case?

The United States Supreme Court reportedly appears unsure how to rule on a case involving sales tax charged on out-of-state e-commerce transactions.

Amazon, among other e-commerce services, has long been able to avoid charging sales tax on out-of-state on purchases — a loophole that rankles in-state brick-and-mortar businesses.

A lawsuit brought in South Dakota challenges a 1992 Supreme Court ruling that states can’t charge sales tax on businesses without a physical presence in the state. A reversal of the law could be worth $18 billion to states and could significantly impact (raise prices) on e-commerce.

A lower court case involving Wayfair, Overstock.com and Newegg ruled in favor of the e-commerce platforms.

Interestingly, in an era of tax avoidance, the justices April 17 heard arguments, with comments against taxes coming from left-wing justices Elena Kagan and Sonia Sotomayor, while conservatives, including President Trump appointee Neil Gorsuch, appeared in favor of taxes, according to Reuters, which is following the case.

“Congress is capable of craftly compromises,” Kagan said without irony. Sotomayer wondered if changing the law would set off an avalanche of new state taxes, hurting Internet start-ups.

In 2015, Justice Anthony Kennedy said the landmark law was outdated and left most of e-commerce tax free.

“Given … changes in technology and consumer sophistication, it is unwise to delay any longer a reconsideration of the court’s holding,” Kennedy said. “The legal system should find an appropriate case for this court to [revisit the original case].”

South Dakota in 2016 passed a law requiring out-of-state businesses collect sales tax if they generate at least $100,000 in revenue or 200 transactions. It is supported by business groups, including the National Retail Federation, whose members ironically feature e-commerce subsidiaries Walmart.com, Target.com and Amazon.

Trump upped the politics of the case when he went after Amazon on Twitter, accusing the company of having an unfair tax advantage. Amazon founder/CEO Jeff Bezos owns The Washington Post, which frequently criticizes Trump.

The Supreme Court is expected to rule on the matter by this summer.