Microsoft Secures Victory in FTC Battle to Acquire Activision Blizzard

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Microsoft logo is seen on a smartphone placed on displayed Activision Blizzard logo in this illustration taken January 18, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

Judge Denies FTC’s Preliminary Injunction Request, Allowing Microsoft Acquisition of Activision Blizzard to Proceed

In a landmark decision, California Judge Jacqueline Scott Corley has denied the Federal Trade Commission’s (FTC) preliminary injunction request, allowing Microsoft to proceed with its acquisition of gaming giant Activision Blizzard. The ruling, delivered after five days of intense courtroom proceedings, marks a significant victory for Microsoft in what has been described as the largest tech acquisition in history.

In a ruling submitted today, Judge Corley said the following:

Microsoft’s acquisition of Activision has been described as the largest in tech history. It deserves scrutiny. That scrutiny has paid off: Microsoft has committed in writing, in public, and in court to keep 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. 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.

Judge Corley’s decision was based on careful consideration of arguments from both the FTC and Microsoft. In her ruling, she highlighted Microsoft’s commitments to ensure Call of Duty’s availability on PlayStation for the next decade, while also extending the popular game franchise to the Nintendo Switch. The judge also acknowledged Microsoft’s groundbreaking agreements to bring Activision’s content to multiple cloud gaming services, which she believes will enhance consumer access.

While the FTC challenged Microsoft’s cloud agreements, Judge Corley ultimately determined that the FTC had not demonstrated a likelihood of prevailing in its claim that this merger would substantially lessen competition in the industry. The ruling also addressed the scope of the console market, with the court agreeing with Microsoft that the Nintendo Switch should be considered part of the market but recognizing the FTC’s differing viewpoint.

Overwatch 2, soon to be managed by Microsoft. Image via Blizzard Entertainment
Overwatch 2, soon to be managed by Microsoft. Image via Blizzard Entertainment

Following the decision, Microsoft President Brad Smith expressed gratitude to the court, emphasizing the importance of a swift resolution and hoping for continued progress in other jurisdictions. Activision Blizzard’s CEO, Bobby Kotick, welcomed the ruling, highlighting the potential benefits for both consumers and workers in the rapidly evolving gaming industry.

In response to the outcome, FTC spokesperson Douglas Farrar expressed disappointment and outlined the FTC’s intention to announce its next steps in the coming days. Farrar stressed the importance of preserving competition and protecting consumers in the areas of cloud gaming, subscription services, and consoles.

Image from The Upcoming Season 4 Reloaded of Call of Duty, soon to be managed by Microsoft. Image courtesy of Activision Blizzard
Image from The Upcoming Season 4 Reloaded of Call of Duty, soon to be managed by Microsoft. Image courtesy of Activision Blizzard

California Judge Jacqueline Scott Corley rules in favor of Microsoft, citing commitments to maintain Call of Duty on PlayStation and expand to Nintendo Switch.

The ruling now enables Microsoft to proceed with the Activision Blizzard acquisition, subject to the condition that the company either concludes the deal around the UK or negotiates a suitable remedy with the UK Competition and Markets Authority (CMA). Notably, the CMA had previously blocked Microsoft’s proposed acquisition in April, and the company is currently appealing that decision.

While European regulators granted approval for the deal in May, the situation remains complex due to the UK’s opposition and ongoing legal proceedings. As a result, it is expected that Microsoft and Activision Blizzard will temporarily extend their merger agreement to cover the CMA appeal process.

Promotional image of Diablo 4, , soon to be managed by Microsoft. Illustration by Blizzard

The FTC has until July 14th to appeal Judge Corley’s decision, but some speculate that the regulator may choose not to pursue further legal action, considering its decision not to appeal a court ruling permitting Meta’s acquisition of Within. This ruling marks the second significant setback for FTC Chair Lina Khan, who has been actively pursuing regulatory action against major tech companies.

Read Also: UK Government Blocks Microsoft’s Acquisition Bid For Activision Blizzard

As the gaming industry eagerly awaits the final outcome, all eyes are now on the future trajectory of Microsoft’s acquisition of Activision Blizzard, which promises to reshape the gaming landscape and potentially fuel further innovation in the sector.