Microsoft's Activision acquisition moves ahead as judge rejects FTC injunction request

The companies may close the deal in the coming days.


A judge has rejected the Federal Trade Commission's request for a preliminary injunction to prevent Microsoft from buying Activision Blizzard for $68.7 billion. Both Microsoft and Activision said they'd abandon the blockbuster merger if Judge Jacqueline Scott Corley granted the injunction.

"This Court’s responsibility in this case is narrow. It is to decide if, notwithstanding these current circumstances, the merger should be halted — perhaps even terminated — pending resolution of the FTC administrative action," Corley wrote in the ruling. "For the reasons explained, the Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content. The motion for a preliminary injunction is therefore denied."

Corley wrote that, as the acquisition "has been described as the largest in tech history," it deserved to be scrutinized. She noted Microsoft's commitment to keep Call of Duty on PlayStation and deals the company has to bring its games and Activision Blizzard titles to Nintendo Switch and cloud gaming services.

Corley ruled that the FTC has until 11:59PM PT on July 14th to obtain a stay pending appeal from the Ninth Circuit Court of Appeals to further delay the deal from closing. Otherwise, Microsoft and Activision will be able to close the deal, giving them just enough time to do so before their July 18th deadline.

The companies may still choose to extend their acquisition agreement while they address a UK regulator's attempt to stop the merger. However, the Competition and Markets Authority, which initially blocked the deal over cloud gaming concerns, said today it is now willing to consider proposals from Microsoft to satisfy its concerns. The CMA is the only other national antitrust regulator that has formally challenged the Activision takeover.

"After today’s court decision in the US, our focus now turns back to the UK. While we ultimately disagree with the CMA’s concerns, we are considering how the transaction might be modified in order to address those concerns in a way that is acceptable to the CMA," Microsoft President Brad Smith said in a statement. "In order to prioritize work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of the litigation in the UK would be in the public interest and the parties have made a joint submission to the Competition Appeal Tribunal to this effect."

"We’re optimistic that today’s ruling signals a path to full regulatory approval elsewhere around the globe, and we stand ready to work with UK regulators to address any remaining concerns so our merger can quickly close," Activision Blizzard CEO Bobby Kotick wrote in an email to employees.

“We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services and consoles," FTC spokesperson Douglas Farrar said in a statement. "In the coming days, we'll be announcing our next step to continue our fight to preserve competition and protect consumers."

The FTC sued to block the merger last December and a hearing in its administrative proceeding is set for August 2nd. If Microsoft and Activision Blizzard can't seal the deal by their deadline, Microsoft will be on the hook for a $3 billion breakup fee unless the two sides renegotiate terms or extend their agreement. As such, they wanted the court to review the FTC's injunction request swiftly.

The companies claimed that, if the preliminary injunction were granted, it would "effectively block the transaction because the FTC's process is 'glacial' and one no substantial business transaction could ever survive."

Reports suggested that, despite the CMA blocking the acquisition, the companies would try to close it anyway and figure out a workaround to continue doing business in the UK. That prompted the FTC to request an injunction in the hopes of being able to "assess the legality of the proposed acquisition" in the August hearing before the deal closes. "Press reports began circulating suggesting that defendants were seriously contemplating closing the proposed acquisition despite the pending administrative litigation and the CMA orders," the FTC's request read.

Corley issued her ruling following a five-day trial in June that saw all manner of juicy gaming industry secrets and emails between industry leaders laid bare for all to see. For one thing, we learned that MachineGames' Indiana Jones project was originally going to be a multiplatform game, but after Microsoft bought ZeniMax, it made the title an Xbox console exclusive.

Update 7/11 1:08PM ET: Added the FTC's statement.

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