Judge sets stage for Activision acquisition
SAN FRANCISCO — A federal judge on Tuesday ruled against the Federal Trade Commission’s attempt to delay Microsoft’s $70 billion acquisition of Activision Blizzard, setting the stage for the tech giant and the video game publisher to merge as soon as this month.
In a 53-page decision, Judge Jacqueline Scott Corley of US District Court for the Northern District of California said the FTC had failed to show it was likely to prove the merger was likely to result in a substantial reduction in competition that would harm consumers.
She denied the FTC’s request for a preliminary injunction, which would have delayed the deal’s closing until after the agency could fight it in an internal court.
The ruling is a significant blow to the FTC’s efforts to police blockbuster tech mergers more aggressively. That strategy is spearheaded by the agency’s chair, Lina Khan, who has argued that Big Tech’s vast influence over commerce and communications has led to anticompetitive behavior. The FTC has sued Microsoft, Meta, and Amazon, but it walked away from one of its cases against Meta and has had little to show for its efforts so far.
Microsoft and Activision cheered the ruling. “We’re grateful to the Court in San Francisco for this quick and thorough decision,” Brad Smith, the president of Microsoft, wrote on Twitter. Bobby Kotick, the chief executive of Activision, said in a statement that the merger would “enable competition rather than allow entrenched market leaders to continue to dominate.”
Douglas Farrar, a spokesperson for the FTC, said in a statement that the agency was “disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services and consoles.” Farrar added that “in the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers.”
The ruling lifts the temporary ban on closing the deal just before midnight July 14, unless the FTC obtains an extension from an appeals court.
There were also indications Tuesday that the tide may be shifting in favor of Microsoft in Britain, which presented the other major hurdle to the acquisition. Regulators there had blocked the deal, saying it would stifle competition in streaming games online. But on Tuesday, Microsoft said it was pausing its formal appeal of that ruling to negotiate a settlement.
The regulator, called the Competition and Markets Authority, said in a statement that it was open to a proposal that would address its concerns, giving Microsoft significant momentum to complete its acquisition as soon as next week.
From the start, the FTC appeared to be fighting an uphill battle against Microsoft, which said early last year that it would buy Activision in an effort to reshape its video game business and bring marquee games like Call of Duty and World of Warcraft to its Xbox platform.
Courts have been concerned that mergers involving direct competitors will harm competition, but Microsoft and Activision are generally not considered direct competitors.
The FTC sued Microsoft in its administrative court last year, but that court does not have the legal authority to stop the deal from closing. In June, the FTC asked Corley to take that step, saying it feared Microsoft was on the verge of completing the transaction despite its concerns.
Over five days of testimony last month, the FTC called highprofile witnesses as it made the case that the merger would be bad for gamers and competition.
The FTC argued that Microsoft had significant incentives to make Activision’s Call of Duty — a franchise with more than $30 billion in lifetime revenue — exclusive to the Xbox, withholding it from Sony’s PlayStation or degrading PlayStation versions of the game.
But Microsoft said it had signed deals with companies like Nintendo to offer Call of Duty on other platforms and had offered Sony a deal as well. Microsoft argued that it would have no incentive to risk angering gamers by reneging on its commitments to keep Call of Duty on PlayStation and that it would lose out on a significant amount of revenue by cutting off PlayStation players.