Circuit Court Upholds Microsoft's Acquisition Of Activision Blizzard, Rejecting FTC's Antitrust Challenge

Circuit Court Upholds Microsoft's Acquisition Of Activision Blizzard, Rejecting FTC's Antitrust Challenge

Introduction

The 9th U.S. Circuit Court of Appeals has ruled in favor of Microsoft, rejecting the Federal Trade Commission's (FTC) appeal to block Microsoft's $69 billion acquisition of Activision Blizzard. The court's decision upheld the lower judge's order, finding that the FTC failed to demonstrate a likelihood of success in its claims that the merger would restrict competition.

Factual Background

Microsoft announced its intention to acquire Activision Blizzard, the maker of popular video games such as Call of Duty, in 2022. The acquisition marked the largest-ever deal in the video gaming market. The FTC filed a lawsuit challenging the merger, arguing that it would harm competitors in the Xbox console and cloud gaming markets.

Procedural Background

The FTC sought a preliminary injunction to block the acquisition while it pursued its administrative challenge. The U.S. District Court for the Northern District of California denied the FTC's request, finding that the agency had not shown that Microsoft's ownership of Activision would "substantially lessen competition in the video game library subscription and cloud gaming markets." The FTC appealed the decision to the 9th U.S. Circuit Court of Appeals.

Issues Involved

1. Antitrust Concerns: Whether the acquisition would restrict competition in the video gaming market.

2. Standard of Review: Whether the lower court applied the correct legal standard in weighing the preliminary injunction.

Submissions of the Parties

FTC's Contentions: The FTC argued that the acquisition would allow Microsoft to fend off competitors to the Xbox console and its subscription and cloud-based gaming business. The agency claimed that the lower court applied an overly stringent standard in weighing the preliminary injunction.

Microsoft's Contentions: Microsoft argued that the acquisition would not harm competition and that the FTC had failed to demonstrate a likelihood of success in its claims.

Reasoning and Analysis

The 9th U.S. Circuit Court of Appeals held that the lower court had applied the correct legal standards and that the FTC had not shown a likelihood of success in its claims. The court found that the FTC's arguments were speculative and that the agency had not provided sufficient evidence to support its claims.

Final Decision

The 9th U.S. Circuit Court of Appeals upheld the lower court's order, rejecting the FTC's appeal and allowing the acquisition to stand.

Law Settled

This judgment reinforces the principle that antitrust challenges to mergers and acquisitions require a showing of likely harm to competition. The court's decision highlights the importance of evidence-based decision-making in antitrust cases.