The Federal Trade Commission (FTC) is not giving up on its attempt to block Microsoft's $68.7 billion acquisition of Activision Blizzard, the largest gaming deal in history. The agency has filed an appeal to challenge a federal judge's decision to deny its request for a preliminary injunction to halt the deal.
The FTC argues that the deal would harm competition and innovation in the gaming industry, and give Microsoft an unfair advantage in the cloud gaming market. The agency claims that Microsoft would be able to leverage its dominant position in PC operating systems, consoles, and cloud services to favor its own games and platforms over those of its rivals.
Microsoft, on the other hand, says it is confident that the deal will be approved, and that it will benefit gamers, developers, and publishers. The company says that it will continue to support Activision Blizzard's games on multiple platforms, and that it will invest in creating more diverse and inclusive content.
Microsoft scored a major victory in its bid to acquire Activision Blizzard. A San Francisco judge ruled that the Federal Trade Commission (FTC) failed to prove that the deal would hurt competition in the video game industry. The judge also said that the deal could help consumers by giving them more access to Activision's popular content.
The FTC had accused Microsoft of hiding information from the regulators and of trying to dominate the gaming market by reducing competition in console switching, multi-game subscription services, and cloud gaming. But Judge Jacqueline Scott Corley rejected these claims and sided with Microsoft.
The Merger Can Now Go Ahead Despite the Appeal
Microsoft Gaming CEO Phil Spencer and Microsoft President Brad Smith praised the court's decision, saying that the evidence showed that the Activision Blizzard deal is good for the industry. Spencer also said that the FTC's allegations did not reflect the realities of the gaming market. Microsoft now has until July 18 to close the deal, or else it will have to pay Activision Blizzard a $3 billion breakup fee.
The appeal will be heard by the US Court of Appeals for the District of Columbia Circuit, which could take months or years to issue a ruling. In the meantime, Microsoft and Activision Blizzard can proceed with their merger plans, unless the FTC obtains a stay from the appeals court or the Supreme Court. Microsoft now has until July 18 to finalize the deal, or else it will have to pay Activision Blizzard a $3 billion termination fee.
Microsoft's takeover of Activision Blizzard faces another hurdle in the UK. The Competition and Markets Authority (CMA) had previously blocked the deal and Microsoft had challenged the decision, hoping for a hearing in the summer. But after Microsoft secured its court victory over the FTC, both sides agreed to pause the appeal and try to work out a deal.
However, the CMA also warned that Microsoft's proposals to address its concerns may spark a new regulatory probe. The CMA's media officer Billy Proudlock told The Verge that the talks are at a very early stage:
“Whilst merging parties don't have the opportunity to put forward new remedies once a final report has been issued, they can choose to restructure a deal, which can lead to a new merger investigation. Microsoft and Activision have indicated that they are considering how the transaction might be modified, and the CMA is prepared to engage with them on this basis. These discussions remain at an early stage and the nature and timing of next steps will be determined in due course. While both parties have requested a pause in Microsoft's appeal to allow these discussions to take place, the CMA decision set out in its final report still stands.”