Microsoft Wins Against FTC In Activision Blizzard Merger Deal

(RTTNews) - Microsoft Corp. has overcome a major hurdle in its plans to buy video game maker Activision Blizzard Inc. with a court verdict against the Federal Trade Commission.

A California judge has denied the FTC's request for a preliminary injunction against the $69 billion deal, allowing the tech major to close its acquisition ahead of the July 18 deadline.

The deal now awaits a favorable move by UK's Competition and Markets Authority or CMA, which filed to block Microsoft's proposed acquisition in April. Microsoft is currently appealing that order with a hearing set to start on July 28.

Meanwhile, following the U.S. verdict, both the CMA and Microsoft reportedly agreed to pause their legal battle to talk about how to modify the deal to address the UK regulator's cloud gaming concerns.

In mid June, US District Judge Edward Davila had granted the FTC's request for a permanent injunction and temporary restraining order to block the merger. In its initial lawsuit filed in December 2022, the FTC argued that the acquisition would enable Microsoft to suppress competition in the gaming industry, particularly with its Xbox gaming consoles and growing subscription content and cloud-gaming business.

FTC then claimed that if the acquisition goes through, Microsoft would gain control over Activision's content, allowing them to potentially withhold or degrade it, leading to reduced competition in terms of product quality, price, and innovation.

In the latest US ruling, Judge Jacqueline Scott Corley noted that Microsoft has committed in writing, in public, and in court to keep the game "Call of Duty" on PlayStation for 10 years on parity with Xbox. It made an agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements to for the first time bring Activision's content to several cloud gaming services.

The judge further said, "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. 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."

Following the ruling, FTC spokesperson Douglas Farrar reportedly said the regulator is disappointed in the verdict citing the clear threat the merger poses to open competition in cloud gaming, subscription services, and consoles. In the coming days, the FTC plans to announce next step to continue its fight to preserve competition and protect consumers.

Microsoft president Brad Smith said the company was grateful to the Court in San Francisco for this quick and thorough decision and hope other jurisdictions will continue working towards a timely resolution.

Further, Activision Blizzard's CEO Bobby Kotick responded that the merger will benefit consumers and workers,and that it will enable competition rather than allow entrenched market leaders to continue to dominate rapidly growing industry.

On Tuesday's regular trading, Activision Blizzard shares gained 10.02 percent to close at $90.99.