A federal judge ruled Tuesday against the Federal Trade Commission’s attempt to delay Microsoft’s $70 billion acquisition of Activision Blizzard, setting the stage for the tech giant and video game publisher to merge as soon as possible. like this month
in 53 pages In the decision, Judge Jacqueline Scott Corley of the US District Court for the Northern District of California said the FTC had failed to show that it was likely to prove that the merger would result in a material reduction in competition that would harm consumers .
She denied the FTC’s request for a preliminary injunction, which would have delayed closing the deal until the agency could fight it in domestic court.
The ruling is a significant blow to the FTC’s efforts to police blockbuster technology mergers more aggressively. That strategy is spearheaded by the agency’s president, Lina Khan, who has argued that Big Tech’s vast influence over commerce and communications has led to anti-competitive behavior. The FTC has sued Microsoft, Meta, and Amazon, but it walked away from one of its cases against Meta and has had little to show for its efforts thus far.
Microsoft and Activision applauded the ruling. “We are grateful to the San Francisco Court for this swift and thorough decision,” Brad Smith, the president of Microsoft, wrote on Twitter. Bobby Kotick, Activision’s chief executive, said in a statement that the merger would “enable competition rather than allow entrenched market leaders to continue to dominate.”
Douglas Farr, a spokesman for the FTC, said in a statement that the agency was “disappointed with this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services and consoles.” Mr. Farr added that “in the coming days we will announce our next step to continue our fight to preserve competition and protect consumers.”
The ruling lifts the temporary ban on closing the deal just before midnight on July 14, unless the FTC obtains an extension from an appeals court.
There were also signs on Tuesday that the tide may be turning in Britain’s favor for Microsoft, presenting the other big hurdle to the acquisition. Regulators had blocked the deal, saying it would stifle competition in online game streaming. But on Tuesday, Microsoft said it was pausing its formal appeal of that ruling to negotiate a settlement.
The regulator, called the Competition and Markets Authority, said in a statement that it was open to a proposal that would address its concerns, giving Microsoft a significant boost to complete its acquisition next week.
From the start, the FTC seemed to be fighting an uphill battle against Microsoft, which said early last year it would buy Activision in an effort to reshape its video game business and bring prominent games like Call of Duty and World of Warcraft to its Xbox. . platform.
Courts are concerned that mergers involving direct competitors would harm competition, but Microsoft and Activision are generally not considered direct competitors.
The FTC sued Microsoft in its administrative court last year, but that court does not have the legal authority to stop the deal from closing. In June, the FTC asked Judge Corley to take that step, saying he feared Microsoft was close to completing the transaction despite the government’s concerns.
During five days of testimony last month, the FTC called high-profile witnesses including Mr. Kotick and Satya Nadella, the CEO of Microsoft, as they argued that the merger would be bad for gamers and competition.
The FTC argued that Microsoft had significant incentives to make Activision’s Call of Duty, a franchise with more than $30 billion in lifetime revenue, exclusive to Xbox, by withholding it from Sony’s PlayStation or downgrading PlayStation versions of the game. .
But Microsoft said it had signed deals with companies like Nintendo to offer Call of Duty on other platforms, and had also offered a deal to Sony. Microsoft argued that it would have no incentive to risk angering gamers by reneging on its commitments to keep Call of Duty on PlayStation, and that it would lose a significant amount of revenue by removing players from PlayStation.
Judge Corley was skeptical of the FTC’s case at times. During closing arguments, he repeatedly pressed the agency to back up his claim that if Call of Duty were to be withheld from PlayStation, enough players would ditch PlayStation for Xbox to make Microsoft worthwhile.
“The FTC has not shown that it is likely to succeed in its assertion that the combined company will likely remove Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially reduce competition in the video game library subscription markets. and games in the cloud”. Judge Corley wrote in her decision.
“On the contrary,” he later added, “the record evidence points to increased consumer access to Call of Duty and other Activision content.”
He wrote that despite the “extensive discovery,” which includes nearly a million documents and 30 statements, the FTC “has not identified a single document that contradicts Microsoft’s publicly stated commitment to make Call of Duty available on PlayStation ( and Nintendo Switch)”.
His denial of a preliminary injunction means Microsoft could complete its merger with Activision as soon as this month in the United States. The companies have set a July 18 deadline for the deal, and Microsoft must pay Activision a $3 billion breakout fee if the deal doesn’t go through by then. The companies could agree to push that date back, or they could merge while their appeal in Britain is pending.
It was the latest loss for the FTC in a case involving one of the tech giants. While Ms Khan’s legal challenges caused companies including Lockheed Martin and chipmaker Nvidia to drop proposed acquisitions early in her tenure, the agency was unsuccessful this year in challenging Meta’s purchase of a reality company. virtual.
Ms Khan has said she will not be deterred by losses in court. The president and her allies believe regulators were too risk-averse for years, leading to runaway corporate consolidation. They have said that the FTC and other government agencies must be willing to pursue novel cases even if they have no guarantee of success.