A federal judge in San Francisco recently rejected the Federal Trade Commission’s request for a preliminary injunction to halt Microsoft’s acquisition of renowned video game maker Activision Blizzard. The judge’s decision allows Microsoft to proceed with the acquisition.
Although the Federal Trade Commission’s demand for a preliminary injunction was refused by the federal judge, the merger agreement between Microsoft and Activision Blizzard still has some roadblocks. The FTC has the option to file an appeal with a federal appellate court, keeping the potential for further legal proceedings open. To effectively complete the transaction, both businesses must also address the issues brought up by the UK’s Competition and Markets Authority.
In her published decision on Tuesday, Judge Jacqueline Scott Corley emphasized that the court’s role in the case is limited. She stated that the court’s responsibility is to determine whether the merger should be halted or terminated during the resolution of the FTC administrative action, considering the current circumstances.
Activision Blizzard Acquisition: Judge Denies FTC Injunction Request
After careful consideration, the judge concluded that the FTC has not provided sufficient evidence to demonstrate a likelihood of success in its claim that this specific vertical merger in the industry would substantially diminish competition. On the contrary, the available evidence suggests that the merger would provide consumers with increased access to Call of Duty and other content from Activision Blizzard . The request for a preliminary injunction was so turned down.
Immediately after the U.S. District Court for the Northern District of California, the shares of Activision Blizzard experienced a surge, reaching a session high of $88.03 per share. It’s worth noting that Microsoft had previously agreed to acquire the game publisher for $95 per share.
In a memo addressed to employees, Activision Blizzard CEO Bobby Kotick expressed optimism regarding the recent court ruling. He stated that the decision provides hope for obtaining full regulatory approval in other parts of the world. Furthermore, Kotick assured employees that the company is prepared to collaborate with regulators in the United Kingdom to address any remaining concerns, with the aim of facilitating a prompt closure of the merger.
Microsoft also expressed appreciation for the court’s decision and regarded it as prompt and comprehensive. Brad Smith, Microsoft’s president and vice chair, conveyed gratitude to the court in San Francisco.
He further expressed hope that other jurisdictions would continue their efforts in reaching a timely resolution. Smith emphasized Microsoft’s commitment to addressing regulatory concerns by adopting a creative and collaborative approach, as they have consistently demonstrated throughout the entire process.
A five-day court hearing to decide whether Microsoft could proceed with its $68.7 billion acquisition of Activision Blizzard—first announced in 2022—was the basis for the most recent ruling. During the hearings, the court evaluated whether to approve the Federal Trade Commission’s request for an urgent injunction to stop the sale from taking place. The judge’s ruling ultimately denied the FTC’s request.
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During the court hearings, the Federal Trade Commission (FTC) presented an argument suggesting that Microsoft had expressed intentions to make certain games exclusive, potentially preventing their availability on Sony’s PlayStation or Nintendo’s Switch consoles if the acquisition were to proceed.
Moving Forward: Progress in the Microsoft-Activision Blizzard Deal
However, Microsoft countered this argument by stating that their goal would be to expand the accessibility of Activision’s Blizzard titles rather than restrict it. They highlighted their interest in growing their Game Pass library of games, aiming to attract more subscribers. The testimony of Microsoft CEO Satya Nadella, Activision Blizzard CEO Bobby Kotick, and officials from Alphabet, Nvidia, and Sony was particularly noteworthy throughout the proceedings.
In December, the Federal Trade Commission (FTC) filed a lawsuit challenging the deal and requesting that an internal administrative law judge investigate the situation. However, in June, before the administrative process could commence, the FTC sought a preliminary injunction to halt Microsoft from finalizing the acquisition. The intention was to expedite the case and present it before the administrative law judge on August 2. Meanwhile, the two companies had aimed to close the deal by July 18.
“We are disappointed with this outcome, as we believe the merger presents a significant risk to fair competition in the realms of cloud gaming, subscription services, and consoles. In the upcoming days, we will announce our next course of action as we remain committed to continuing our fight in order to safeguard competition and protect consumers,” stated an FTC spokesperson.
During the hearings, Bobby Kotick mentioned that the board of Activision Blizzard did not envision a feasible path forward for the deal if the judge were to grant the preliminary injunction. Now, both companies are shifting their focus to Europe, where they will address the regulatory concerns and seek approval for the acquisition in that region.
Despite our disagreement with the Competition and Markets Authority (CMA) on their concerns, we are actively considering modifications to the purchase that would appease the CMA. “Even though we disagree with the Competition and Markets Authority (CMA) about their concerns, we are actively looking into possible changes to the deal that could satisfy the CMA.
To prioritize our efforts in developing these proposals, Microsoft and Activision Blizzard have reached an agreement with the CMA to request a stay of litigation in the UK, as we believe it would be in the public interest. Consequently, the parties have jointly submitted a request to the Competition Appeal Tribunal to this effect.”
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