clock menu more-arrow no yes mobile

Filed under:

Judge rules for Microsoft in FTC fight over Activision

$68.7 billion deal can go forward in the US

An attorney with the Federal Trade Commission (FTC) carries an XBOX game console box following a hearing at the Phillip Burton Federal Building and U.S. Courthouse June 22, 2023 in San Francisco, California. Top executives from Microsoft and Activision/Blizzard will be testifying during a five-day hearing against the FTC to determine the fate of a $68.7B merger of the two companies.
A Federal Trade Commission lawyer carries a boxed Xbox Series X console out of court after the first day of a weeklong hearing into the FTC’s bid to shut down Microsoft’s purchase of Activision Blizzard.
Photo: Philip Pacheco/Getty Images

Microsoft’s planned $68.7 billion purchase of Call of Duty and World of Warcraft publisher Activision Blizzard can go forward in the U.S., a federal judge ruled on Tuesday. Judge Jacqueline Scott Corley denied the Federal Trade Commission’s request to stop the deal before its deadline for completion on July 18.

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

She continued:

Microsoft’s acquisition of Activision has been described as the largest in tech history. It deserves scrutiny. That scrutiny has paid off: Microsoft has committed in writing, in public, and in court to keep Call of Duty on PlayStation for 10 years on parity with Xbox. It made an agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements to for the first time bring Activision’s content to several cloud gaming services. This Court’s responsibility in this case is narrow. It is to decide if, notwithstanding these current circumstances, the merger should be halted — perhaps even terminated — pending resolution of the FTC administrative action. For the reasons explained, the Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content. The motion for a preliminary injunction is therefore DENIED.

The FTC can appeal this ruling; it has until July 14 at 11:59 p.m. PDT to make that decision.

Corley’s ruling came after a weeklong hearing at the end of June, during which federal regulators argued that Microsoft would gain anticompetitive power by acquiring a publisher as large as Activision Blizzard. Government lawyers said Microsoft was likely to limit PlayStation users’ access to Activision Blizzard titles like Call of Duty, either by making them exclusive to Microsoft’s Xbox and PC platforms, or publishing diminished versions to Sony’s.

“Our merger will benefit consumers and workers,” Activision Blizzard chief executive Bobby Kotick said on Tuesday. “It will enable competition rather than allow entrenched market leaders to continue to dominate our rapidly growing industry.”

Two other major regulatory bodies in the United Kingdom and European Union have decided too; the U.K.’s Competition and Markets Authority moved to block the deal in April; the European Union approved it in May. Microsoft appealed the CMA decision shortly after it was announced, and that process is expected to take a while. Elsewhere, the deal has been approved by the majority of foreign markets, small and large.

The win for Microsoft means its deal could be completed without Microsoft having to pay a $3 billion termination fee if the deal was scuttled, as long as the companies skirt the U.K. or reach an agreement with the Competition and Markets Authority. Closing the deal without approval in the U.K. is a complicated option, however, and it’s possible that Microsoft and Activision will choose to extend the deal deadline until they have worked out the issues. Microsoft’s attorneys had said that a ruling in favor of the FTC — which was trying to have the deal stopped until its own administrative hearing could be resolved — would scrap the acquisition outright, regardless of what the FTC’s own hearing determined.

“We’re grateful to the Court in San Francisco for this quick and thorough decision and hope other jurisdictions will continue towards a timely resolution,” Brad Smith, Microsoft’s president, said in a statement Tuesday. “As we’ve demonstrated consistently throughout this process, we are committed to working creatively and collaboratively to address regulatory concerns.”

Update: Following the decision, the FTC issued the following statement to Polygon:

We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles. In the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers.

Sign up for the newsletter Sign up for Patch Notes

A weekly roundup of the best things from Polygon