Microsoft has won the lawsuit with the Federal Trade Commission, allowing for the completion of its acquisition of Activision Blizzard deal which was halted following the regulator’s legal intervention last December.
US District Judge Jacqueline Scott Corley of San Francisco dismissed the FTC’s claim that the agreement would negatively impact consumers, as it would grant Microsoft, the maker of Xbox game consoles, sole access to popular games such as the highly sought-after Call of Duty.
The European Union Commission had last month approved the $69 billion deal, while the U.K.’s Competition and Markets Authority (CMA) and the FTC were opposed to it.
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The regulators were all concerned that the deal will impact competition in the nascent cloud gaming market. The bone of contention is that by merging Activision Blizzard’s games with Microsoft’s cloud game streaming for Windows, Microsoft has the potential to diminish the competitiveness of other PC operating system providers in relation to its own Windows operating system.
The judgment is a huge blow for Sony, which pushed vigorously to prevent the deal – providing evidence to support the FTC’s anti-competition claims. Part of the PlayStation testimony is the argument by its boss, Jim Ryan, that Game Pass is bad for the industry. He said it is secretly but “unanimously” hated by game developers.
In its anti-competition argument, the FTC said if the deal goes through, it will enable Microsoft to leave rival console makers like Nintendo and market-leader Sony Group out in the cold – using the Activision games.
But the court disagreed. In her ruling, Judge Corley held that Microsoft has shown a level of commitment to keep games from Sony, adding that the FTC has failed to prove how the deal will lessen competition.
“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, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets,” she wrote.
“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 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 legal system worked:
A fair and neutral court has reached the correct conclusion about Activision Blizzard’s merger with Microsoft based on facts and the law.
The judge’s ruling rejects the FTC’s ideologically-driven attempt to prevent a deal that benefits gamers and allows…
— Lulu Cheng Meservey (@lulumeservey) July 11, 2023
Activision shares surged 10 percent while Microsoft shares rose 64 cents to $332.47 following the ruling. The FTC has until Friday to appeal the decision.
The ruling is expected to make things easier for Microsoft in the U.K., after paving the way for the deal in the U.S. Following the US judge’s ruling, the CMA expressed its willingness to assess Microsoft’s proposals aimed at addressing antitrust issues within the UK. This suggests that there is a possibility of the two parties reaching a resolution.
In a statement, Microsoft said that its attention has now shifted back to the UK. Although the company maintained its disagreement with the CMA’s decision, it acknowledged that it is actively exploring potential modifications to the transaction in order to address the concerns raised by the authority.