Microsoft wins case against FTC to acquire Activision Blizzard for $69B

A federal judge will not block Microsoft from closing its $69 billion deal to acquire video game giant Activision Blizzard, a defeat for US regulators who had asked for a temporary injunction while legal challenges to the merger unfold. The deal will make Microsoft the third-largest video game publisher in the world, with control over popular franchises such as “Call of Duty,” “World of Warcraft” and “Diablo.”

District Judge Jacqueline Scott Corley wrote in the 53-page partially redacted opinion:

The US government has not shown it is likely to succeed on its assertion the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets.

The FTC had challenged the acquisition, first in its in-house administrative court and then in US federal court, alleging that the combination would hurt video gamers by giving Microsoft control over a number of hugely popular franchises. Microsoft could potentially finalize the deal with Activision in a matter of days, ahead of a July 18 contractual deadline, or the parties could mutually seek to extend that timeframe.

US antitrust officials at the Federal Trade Commission had argued that an injunction temporarily blocking the deal was necessary because allowing the merger to close amid ongoing litigation would have caused immediate harm to video gamers and other consumers.

During a five-day hearing last month in federal court, Microsoft executives including CEO Satya Nadella testified that properties such as “Call of Duty” would not be restricted from competitors following the deal’s close. As a response to regulator scrutiny, Microsoft has also signed various multi-year licensing agreements with companies including Nvidia and Nintendo, to ensure the availability of content for their platforms if the merger is approved.

The stakes of the court fight were high: By its own admission, Microsoft had said in filings that a victory for the FTC at this stage “will effectively block the transaction” entirely, because of the expected time and expense associated with the FTC’s in-house merger challenge.

Tuesday’s ruling, however, gave Microsoft the benefit of the doubt because the FTC failed to prove the combined company would have the incentive to keep “Call of Duty” exclusive to Microsoft-owned platforms such as Xbox. UK officials also previously moved to block the Activision merger in April, citing some of the same concerns the FTC raised in its case and triggering an appeal from Microsoft.

Following Tuesday’s decision in the US, Microsoft announced a deal with UK antitrust officials to suspend litigation over the merger while both sides try to reach an agreement on how the acquisition might be altered to address competition concerns in that country.