FTC Blizzard Ends for Microsoft as Court Rules in Favor of Activision Deal

Following five days of rigorous testimony, a verdict has been reached by a California judge in favor of Microsoft, granting the tech behemoth the green light to move forward with its acquisition of Activision Blizzard. Judge Jacqueline Scott Corley dismissed the Federal Trade Commission's (FTC) plea for a temporary restraining order, marking a momentous triumph for Microsoft in its endeavor to acquire the gaming corporation. While an ongoing antitrust case pursued by the FTC remains pending, this ruling clears the path for the finalization of this momentous agreement, per The Verge. Microsoft had reached an agreement to acquire Activision Blizzard for $95.00 per share, in an all-cash transaction valued at $68.7 billion, inclusive of Activision Blizzard’s net cash in January last year.

Judge Corley's ruling in favor of Microsoft

In her ruling, Judge Corley acknowledged the magnitude of the acquisition and the need for scrutiny. However, she emphasized that Microsoft had made commitments to maintain Call of Duty's presence on PlayStation for the next decade and to bring the game to the Nintendo Switch. The judge also took into consideration several agreements that Microsoft had made to bring Activision's content to various cloud gaming services. Based on the evidence presented, the court found that the FTC had not demonstrated a likelihood of success in proving that the merger would substantially lessen competition. Therefore, the motion for a preliminary injunction was denied. When the deal closes in a few days, Microsoft will become the world’s third-largest gaming company by revenue, behind Tencent and Sony.

Microsoft's commitments and reaction

Judge Corley's decision indicates that she has sided with Microsoft regarding its commitments to preserving competition and consumer access to Call of Duty. Microsoft's President, Brad Smith expressed gratitude for the court's decision and hoped for timely resolutions in other jurisdictions. Phil Spencer, the head of Xbox, also commended the ruling and stated that the evidence presented during the trial demonstrated the positive impact of the Activision Blizzard deal on the gaming industry. “The evidence showed the Activision Blizzard deal is good for the industry and the FTC’s claims about console switching, multi-game subscription services, and cloud don’t reflect the realities of the gaming market,” read Spencer's tweet. 

Activision Blizzard's response and the FTC's next steps

Activision Blizzard's CEO, Bobby Kotick welcomed the court's decision, stating that the merger would benefit consumers and workers and foster competition in the rapidly growing gaming industry. However, the FTC expressed disappointment and reiterated its concerns about the potential threat the merger poses to competition in cloud gaming, subscription services, and consoles. The FTC spokesperson, Douglas Farrar announced that the agency would announce its next steps to continue the fight to preserve competition and protect consumers.

Impact on the U.K. acquisition and appeal

The court ruling allows Microsoft to proceed with the Activision Blizzard acquisition before the July 18 deadline but only if the company agrees to close the deal around the UK or negotiates a remedy with the UK Competition and Markets Authority (CMA). Microsoft's proposed acquisition was blocked by the UK regulator in April 2023 and Microsoft is currently appealing that decision. The pause in the legal battle between Microsoft and the CMA indicates a willingness to address the CMA's concerns related to cloud gaming.

Outlook and possible FTC appeal

European regulators had previously approved the deal in May 2023, which means Microsoft could theoretically proceed without the U.K. and without an injunction in the US. However, negotiations with the CMA are underway to avoid such a scenario. The FTC has the opportunity to appeal Judge Corley's decision before July 14 but it remains to be seen whether the regulator will continue its case against Microsoft and Activision Blizzard. If the court order stands, this would mark a significant setback for FTC Chair Lina Khan who has been actively pursuing antitrust actions against major tech companies since taking office in 2021.