Federal judge in San Francisco denies FTC preliminary injunction to halt Microsoft from acquiring Activision Blizzard by 18 July
Microsoft’s drawn out and contentious acquisition of gaming publisher Activision Blizzard, has witnessed a potentially significant intervention in a US courtroom.
Last month a US judge had allowed the US Federal Trade Commission (FTC) to apply for a temporary restraining order and preliminary injunction ahead of a 18 July deadline agreed by the two firms to close the deal.
If Microsoft fails to complete the $68.7 billion acquisition, which was originally announced in January 2022, it could end up owing Activision Blizzard a termination fee of up to $3bn.
The FTC had initially asked an administrative judge to block the transaction in December 2022, and the case was due to begin on 2 August.
But now a federal judge in San Francisco has denied the Federal Trade Commission’s motion for a preliminary injunction to stop Microsoft closing the deal before the 18 July deadline.
“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,” Judge Jacqueline Scott Corley wrote in her decision, published on Tuesday.
“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.”
Microsoft President Brad Smith has welcomed the ruling in a tweet.
Our statement on today’s decision: pic.twitter.com/jRDD8PhBeT
— Brad Smith (@BradSmi) July 11, 2023
But this doesn’t mean that Microsoft’s deal can go ahead, as the FTC can file its appeal against the decision to the federal appellate court, by 14th July.
But more pressingly, Redmond needs to address the UK regulator’s objections, after the Competition and Markets Authority (CMA) in April officially blocked the deal, citing potential harm to the nascent market for cloud gaming.
The UK decision provoked a furious response from Microsoft, which said at the time that the CMA’s decision was a sign that the UK was “clearly closed for business”, and added the CMA’s move “discourages technology innovation and investment” in the UK.
Microsoft and Activision appealed against the CMA ruling (which is due to be heard on 28 July) and Microsoft President Brad Smith has met with the UK’s Chancellor Jeremy Hunt in London for talks on the matter.
Meanwhile the chief executive of the UK’s CMA appeared before a Parliamentary panel in May to defend the Microsoft-Activision ruling to Parliament, and said the agency was not seeking to foster ‘hostile environment’.
The UK and US regulators are somewhat alone in their objections to the deal.
In May Chinese regulators (SAMR) officially approved Microsoft’s the $69 billion takeover of Activision Blizzard.
Meanwhile European Union regulators, which initially expressed concerns, also approved the deal in May, after Microsoft offered ten-year licensing deals to rivals.
However Sony, the main gaming console rival to Microsoft, continues to object and has not accepted such a deal.
The deal has so far been approved by nearly 40 countries, including 27 in the EU along with others including Japan and Brazil.
Microsoft still faces an ongoing antitrust case by the Federal Trade Commission,
In a statement to the Verge, FTC spokesperson Douglas Farrar said the FTC was still planning its next move.
“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,” Farrar reportedly said.
But the UK block is still the main snagging point for Microsoft ahead of the 18 July deadline.
The US judge’s ruling now allows Microsoft to close its Activision Blizzard deal ahead of the 18 July deadline without the UK, but this will be complicated, and Microsoft is seeking to explore with the UK’s CMA some form of remedy.
It is therefore likely Microsoft and Activision Blizzard will temporarily extend their merger agreement to cover the CMA appeal process instead.
But Brad Smith has tweeted that Microsoft and Activision have dropped their UK appeal as they seek a “way that is acceptable to the CMA.”
Our statement on the mutual request with the CMA for a pause of our appeal in the UK: pic.twitter.com/8Aky2IJjxS
— Brad Smith (@BradSmi) July 11, 2023