Judge shoots down FTC attempt to stall Microsoft-Activision merger

Final update The FTC's attempt to stall a merger between Microsoft and gaming behemoth Activision-Blizzard has been struck down by a US federal judge, who is unconvinced the mega-acquisition would harm competition.

In a ruling issued today, northern California's Judge Jacqueline Scott Corley denied a temporary injunction sought by the FTC to hold off Microsoft's $69bn takeover of the Call of Duty developer. If the FTC had been successful, the injunction would have prevented Microsoft from closing the deal while the watchdog pursues an administrative case against the enterprise software goliath and its proposed swallowing of Activision-Blizzard.

The regulator fears the Windows giant will, post-acquisition, ensure Activision's popular titles appear only on Microsoft's Xbox series, and lock out other consoles and gaming systems. That would reduce choice and competition in the video games market. Microsoft promised it wouldn't do that, such as by vowing to keep Call of Duty available on rival Sony's PlayStation line, and the judge bought it.

"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," the judge wrote in her partially redacted ruling [PDF].

"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 evidence points to more consumer access to Call of Duty and other Activision content. The motion for a preliminary injunction is therefore denied."

She said the FTC hadn't shown clear evidence that the proposed merger would result in Microsoft restricting access to Activision's software on non-Redmond platforms. She dismissed evidence that the historically monopolist-minded Microsoft would abuse its position, pointing out it was (ostensibly) committed to open access for the time being.

The judge also cast doubt on the testimony of Harvard economics Professor Robin Lee, saying that his claims that the deal would harm competition were unproven and based on faulty logic.

"We're grateful to the court for swiftly deciding in our favor," said Microsoft's Xbox chief Phil Spencer.

"The evidence showed the Activision Blizzard deal is good for the industry and the FTC's claims about console switching, multi-game subscription services, and cloud don't reflect the realities of the gaming market."

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The FTC is free to appeal the ruling but may not – the agency has form in backing down when challenged by the judiciary. That said, under the leadership of Big Tech critic Lina Khan, the FTC has been taking a more muscular approach to mergers. The regulator had no comment at time of publication.

This ruling leaves the UK in an interesting position. Europe, after much negotiation involving promises on sharing content, has approved the deal. China and others have also given their blessing to the merger, leaving Britain's antitrust watchdog – the Competition and Markets Authority, or CMA – the sole major standout objecting to the acquisition. But that may be changing.

"We stand ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns set out in our final report," a CMA spokesperson told The Register.

"In order to be able to prioritise work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of litigation in the UK would be in the public interest and all parties have made a joint submission to the Competition Appeal Tribunal to this effect." In other words, rather than suing each other, they've agreed to talk it over.

It appears a settlement may be possible on Brexit Island, and it's conceivable that the merger could go ahead without the UK's approval. However, it's clear Microsoft would like a clean sweep for the deal to go ahead and while it's possible that Blighty could carry on its takeover, an agreement in Britain is looking more and more likely. ®

Updated to add on July 12

The FTC has signaled it will appeal Judge Corley's decision. Technically speaking, there is a temporary restraining order in place until July 14 preventing Microsoft's Activision-Blizzard takeover from progressing. That restraining order was taken out by the FTC, which hoped to supersede that order with the above temporary injunction as it carries out an administrative case against the Windows giant and its proposed acquisition.

With the restraining order about to run out, and the injunction denied, the FTC will need to ask an appeal court to put in place an emergency stay as well as challenge Judge Corley's ruling if it's to stop the deal in time for its own proceedings, due to start in August.

Update on July 14

An appeals court has rejected the FTC's attempt to block the merger of Microsoft and Activision-Blizzard with an injunction. The regulator has now paused its efforts against the takeover, which may mean the acquisition is set to complete.