U.S. District Court Denies FTC’s Bid for Preliminary Injunction: Microsoft to Move Ahead with Acquisition of Activision Blizzard

U.S. District Court Denies FTC’s Bid for Preliminary Injunction: Microsoft to Move Ahead with Acquisition of Activision Blizzard

U.S. District Judge Jacqueline Scott Corley denied the Federal Trade Commission’s (FTC) bid for a preliminary injunction and has handed Microsoft a major victory by declining to block its looming $69 billion takeover of video game company Activision Blizzard.

The Court in its ruling found that Microsoft’s ownership of Activision would not abuse competition in the video game library subscription and cloud gaming markets. The Judge stressed that that evidence pointed to more access by consumers to popular Activision titles.

The decision was issued after a five-day mini trial in Federal Court in San Francisco.

Judge Corley wrote, “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.”

Previously, a temporary restraining order was issued by the Court to decide whether the merger should be temporarily blocked, was dated to expire on July 14 unless the FTC won a stay pending in an appeal from the U.S. Ninth Circuit Court of Appeals.

Microsoft President Brad Smith in a statement said, “We are grateful to the Court in San Francisco for this quick and thorough decision and hope other jurisdictions will continue working towards a timely resolution.”

The FTC’s suit alleged violations of Section 7 of the Clayton Act, which bars mergers and acquisitions that could potentially lessen competition or create a monopoly, and Section 5 of the FTC Act, which prohibits unfair methods of competition.

The agency in December sued to block the merger, arguing that it will enable the tech giant to suppress competition in gaming. The deal would tie Microsoft, which owns the Xbox console and a game streaming service, with Activision, maker of Call of Duty, Diablo and Candy Crush, as the company maps out an aggressive expansion of its gaming arm.

Judge Corley noted that, “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.”

Microsoft’s defense revolved around arguments that competition would increase in the industry if the merger is greenlit because it would be able to challenge Sony’s dominance.

The FTC claimed that the deal would harm gamers by giving Microsoft outsized power to, for example, make Activision content exclusive to Xbox or degrade the quality of its games on competing consoles.

The agency referred to the company’s purchase in 2020 of ZeniMax, parent company of Bethesda Softworks and maker of The Elder Scrolls, Fallout and Starfield, for $7.5 billion.

After the acquisition, Microsoft made one of ZeniMax’s most popular titles, Starfield, exclusive to Xbox and Windows despite assuring to European competition regulators that it wouldn’t limit games on rival consoles.

Microsoft reached a labor neutrality agreement last year with the Communication Workers of America to secure its approval of the deal. The Department of Justice has been assessing mergers’ impact on labor as part of its antitrust review process.