Judge Approves Microsoft’s Acquisition of Activision Blizzard for $69 Billion

Microsoft has secured a significant win as a federal judge rejects attempts to halt its planned acquisition of Activision Blizzard for $69 billion. Regulators argued that the deal would negatively impact competition.

U.S. District Judge Jacqueline Scott Corley said in her ruling that the merger merited review and noted that it could be the largest in the history of the technology industry. But federal regulators couldn’t show how it would cause serious harm, and likely wouldn’t if they put it to a full test, he wrote.

The Federal Trade Commission, which oversees competition law, “has not raised serious questions about whether the proposed merger would significantly lessen competition” among video game consoles or in the growing markets for monthly game subscriptions or cloud-based gaming, Corley said.

The ruling in Microsoft’s favor was no surprise after the company’s lawyers prevailed in a 5-day San Francisco court hearing that ended at the end of last month. The proceedings featured testimony from Microsoft CEO Satya Nadella and longtime Activision Blizzard CEO Bobby Kotick, both of whom promised to keep Activision’s blockbuster game Call of Duty available to people who play it on consoles that compete with Microsoft’s Xbox — specifically Sony’s PlayStation.

“The merger will benefit consumers and workers. It will allow for competition rather than incumbent market leaders continuing our fast-growing industry,” Kotick said in a written statement after Tuesday’s decision.

The FTC had asked Corley to issue an injunction to temporarily prevent Microsoft and Activision from doing business until an internal FTC judge can review it at a hearing in August.

Both companies suggested that such a delay would effectively force them to abandon the acquisition agreement they signed nearly 18 months ago. Microsoft promised to pay Activision a $3 billion severance fee if the deal is not completed by July 18.

The FTC has not said whether it plans to appeal Corley’s decision

“We are disappointed by this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services and consoles,” FTC spokesman Douglas Farrar said in a prepared statement. “In the coming days, we will announce the following to continue our fight to preserve competition and protect consumers.”

The decision is a setback for the FTC’s increased oversight of the technology industry under Chairman Lina Khan. He was appointed by President Joe Biden in 2021 because of his tough stance on the monopolistic behavior of tech giants like Amazon, Google and Facebook. older Meta.

Another judge rejected the FTC’s attempt earlier this year to block Meta from taking over virtual reality fitness company Within Unlimited. And on Thursday, Khan is expected to face tough questioning from congressional Republicans, who have subpoenaed him to testify at a House hearing on the commission’s record enforcement actions and his management of the agency’s staff.

Corley, himself a candidate for Biden, expressed doubts about the FTC’s case during the trial, particularly the hypothetical harm that would result if Microsoft removed Call of Duty from competing platforms or offered an unparalleled experience on competing consoles.

“The gist of the FTC’s complaint is that Call of Duty is so popular and such an important offering across all video game platforms that the combined company likely intends to foreclose it from competitors for its own financial gain to the detriment of consumers.” Corley wrote in his decision.

But he said the FTC had not made a strong case that Microsoft was likely to pull Call of Duty from rival Sony’s PlayStation — in fact, Microsoft executives have repeatedly vowed not to do so.

As antitrust investigations and legal challenges mounted in the United States and around the world, Microsoft promised that Call of Duty would appear on Nintendo’s Switch console, Nvidia’s cloud gaming service and other platforms for at least a decade.

In this way, “the review has paid off,” Corley concluded in his decision, echoing the message he conveyed to regulators in the courtroom last month.

“In many ways, you won,” Corley had told the FTC’s lead trial attorney, James Weingarten.

“I don’t think we won,” Weingarten responded, saying there was no evidence that the “shamefully negotiated” deals adequately protected the market.

Shares of Activision Blizzard Inc. jumped more than 11% on Tuesday on the decision, a year high.

The decision removes the biggest, but not the only, obstacle to the merger.

Activision Blizzard’s takeover has been approved by several other countries and the European Union, but remains opposed by Britain’s Competition and Markets Authority. The company was set to challenge that decision in a court hearing later this month, but the FTC’s decision appeared to force a reconsideration.

The UK regulator and Microsoft announced on Tuesday that they had jointly sought a postponement of the hearing, saying it would be in the public interest to “stay the trial” while they look for a way to resolve their differences so the deal can go ahead.

“We are ready to consider any proposal from Microsoft to restructure the deal in a way that addresses the concerns raised in the merger decision,” the CMA said in a prepared statement.

Microsoft president Brad Smith said in a statement that the company plans to change its deal “in a way that is acceptable to the CMA,” although it disagrees with the agency’s concerns.

Canadian regulators are also investigating the deal and have concluded that it is “likely to result in” the prevention or reduction of competition in game consoles, subscription services and cloud-based games, according to a letter sent to Microsoft late last month and sent to the United States. FTC Concerns.