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Microsoft is one step closer to finalizing its $75 billion acquisition of Activision Blizzard after a US federal judge rejected the Federal Trade Commission’s attempt to halt the deal. Additionally, the UK’s competition watchdog has indicated a willingness to discuss a previously rejected merger.
Shares in Activision, known for games like Call of Duty, rose over 11% to $92 per share in New York trading, nearing the $95 per share offer price since Microsoft announced its bid in January 2022.
Judge Jacqueline Scott Corley, in her decision, stated that the FTC has not provided sufficient evidence to support its claim that the merger would result in the removal of Call of Duty from Sony PlayStation or substantially reduce competition in the video game library subscription and cloud gaming markets.
The FTC has until Friday to appeal the decision and had sought a preliminary injunction to block the deal. Separate proceedings will take place in the FTC’s in-house court starting on August 2.
This ruling deals a significant blow to one of the most prominent antitrust challenges under the Biden administration, which has prioritized cracking down on anti-competitive practices across the US economy.
Douglas Farrar, spokesperson for the FTC, expressed disappointment with the outcome and stated that the merger poses a clear threat to open competition in cloud gaming, subscription services, and consoles. The agency will announce its next steps to preserve competition and protect consumers in the coming days.
The judge’s decision paves the way for Microsoft and Activision to close their deal before the July 18 deadline. However, the deal still faces obstacles in the UK, where the Competition and Markets Authority blocked it in April, citing concerns about hampering growth in cloud gaming.
Despite this, the CMA issued a statement after the US court ruling indicating its willingness to consider any proposals from Microsoft to address its concerns, marking a departure from its original decision.
Microsoft’s vice chair and president, Brad Smith, expressed gratitude for the California decision while stating that the company’s focus now shifts to the UK. Microsoft is considering modifications to the transaction to address the CMA’s concerns.
Activision’s chief executive, Bobby Kotick, informed staff that the ruling in California signals a path to regulatory approval in other parts of the world.
The FTC’s case was an unusual attempt to block a vertical merger between companies operating in different parts of the industry. US courts have been more inclined to block horizontal deals involving companies in the same market.
The FTC argued that the acquisition would harm competition in the video game consoles market, where Xbox lags behind PlayStation. It raised concerns about Microsoft using its ownership of Activision to restrict game availability on rival consoles. The FTC also expressed concerns about Microsoft’s Game Pass service and its potential dominance in cloud gaming.
During the hearing, the companies argued that the deal would benefit competition in the video game industry and warned that an injunction would likely kill the deal.
Additional reporting by Javier Espinoza and Tim Bradshaw.
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