2 years ago
Talha Sonmez
In a significant development, a California judge has ruled in favour of Microsoft, allowing the tech giant to proceed with its acquisition of Activision Blizzard. Despite facing an ongoing antitrust case by the Federal Trade Commission (FTC), Microsoft received a denial of the regulator's preliminary injunction request. This decision by Judge Jacqueline Scott Corley comes after five days of intense testimony, marking a pivotal moment in the high-profile FTC v. Microsoft legal battle.
Microsoft's Commitments
Judge Corley acknowledged the magnitude of Microsoft's acquisition of Activision, regarded as the largest in tech history, emphasizing the need for scrutiny. However, after careful consideration, the judge found Microsoft's commitments significant. The company has made public and written assurances to maintain Call of Duty on PlayStation for ten years, on par with Xbox. Furthermore, Microsoft has agreed with Nintendo to bring Call of Duty to Switch and with several cloud gaming services to introduce Activision's content. These commitments, which enhance consumer access to Call of Duty and other Activision content, played a crucial role in the court's decision.
Denial of Preliminary Injunction
The court's responsibility, in this case, was to determine whether the merger should be halted or potentially terminated during the resolution of the FTC administrative action. Judge Corley concluded that the FTC failed to demonstrate a likelihood of prevailing in its claim that this specific vertical merger within the industry would substantially lessen competition. On the contrary, the evidence presented showed increased consumer access to Activision's content. Consequently, the judge denied the FTC's motion for a preliminary injunction, allowing Microsoft to proceed with its Activision Blizzard acquisition.
Implications and Next Steps
With the court's ruling, Microsoft can move forward with the acquisition ahead of the July 18th deadline. However, there are still potential hurdles to overcome. If Microsoft chooses to proceed with the acquisition in the UK, it must navigate the Competition and Markets Authority's (CMA) block or negotiate a suitable remedy. The company has appealed the CMA's decision, and a hearing is scheduled for July 28th.
European regulators approved the deal in May, paving the way for Microsoft to close the acquisition without the UK's involvement and a US injunction. Nevertheless, to address the complexities, Microsoft and Activision Blizzard will likely temporarily extend their merger agreement to cover the CMA appeal process.
FTC's Next Steps
The FTC can appeal Judge Corley's decision **before July 14th**. However, considering the regulator's recent decision not to appeal a court's ruling permitting Meta's acquisition of Within, the FTC might abandon its case against Microsoft and Activision Blizzard.
Conclusion
This ruling represents a significant milestone for Microsoft as it secures approval for acquiring Activision Blizzard despite the ongoing antitrust case. While challenges remain, this decision reflects the court's recognition of Microsoft's commitments to uphold competition and enhance consumer access to Activision's content. As the legal battle continues, all eyes will be on the next steps taken by the FTC and the potential implications for the gaming industry's future.
Update:
Microsoft's triumph in its legal battle against the Federal Trade Commission (FTC) has set the stage for its next challenge—ensuring the success of its Activision Blizzard acquisition in the UK.
Microsoft and the UK's Competition and Markets Authority (CMA) have temporarily agreed to suspend their legal dispute surrounding the proposed acquisition. The CMA is the final regulatory authority standing in the way of Microsoft's completion of the $68.7 billion deal with Activision Blizzard.
The CMA initially moved to block Microsoft's acquisition in April, prompting the company to appeal the decision. However, in light of the recent US court ruling in Microsoft's favour, the focus now shifts back to the UK. Microsoft has entered into discussions with the CMA to explore possible modifications to the transaction that would address the regulator's concerns regarding cloud gaming.
"While we fundamentally disagree with the CMA's concerns, we are actively considering potential modifications to the transaction to address those concerns in a manner acceptable to the CMA," states Brad Smith, President of Microsoft, in a statement to The Verge. Smith further notes that to prioritise work on these proposals, Microsoft and Activision have jointly requested the Competition Appeal Tribunal (CAT) to avoid litigation in the UK.
The CMA has confirmed the agreement, expressing its willingness to evaluate any proposals from Microsoft to restructure the transaction to address the concerns outlined in its Final Report.
The CAT will ultimately decide whether to approve or deny the request. However, it will likely be approved, enabling both parties to engage in further negotiations. The CMA had previously attempted to file a request to delay Microsoft's appeal during the FTC v. Microsoft hearing. However, the CAT rejected this request, as it would have postponed the appeal process from July to October, contradicting principles of justice and fairness.
This turn of events has created an opportunity for the UK regulator to discuss with Microsoft potential cloud-based solutions that would benefit consumers in the UK. Prior reports also suggested that Microsoft had been exploring alternative options to finalise the deal, such as proceeding without the UK's involvement or potentially excluding Activision's operations in the UK. However, given the complexities involved, both parties have now demonstrated a willingness to negotiate to avoid such scenarios.
As the pause in legal proceedings commences, Microsoft and the CMA aim to find a mutually acceptable resolution that addresses the regulator's concerns, ultimately paving the way for the completion of the Activision Blizzard acquisition in the UK.
**Disclaimers**
[Talha Sonmez](https://twitter.com/Roekaine) is the Founder & CEO of Stock Checker.
Images used in this article belong to Microsoft, Xbox, and Activision Blizzard, respectively.